ING: EUR/USD more likely to hit 1.08 than 1.10 after ECB meeting

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Synopsis: ING believes that EUR/USD is more likely to fall to 1.08 rather than rise to 1.10 after this week’s ECB meeting. The current balance between USD-positive US political developments and USD-negative Fed rate repricing is keeping EUR/USD near 1.09, with minimal contribution from the euro leg.

Key Points:

  • Current Trading: EUR/USD remains close to 1.09, reflecting a balance between US political factors favoring USD strength and Fed rate repricing that is USD-negative.
  • Eurozone Data:
    • ZEW Surveys: Confirmed a drop in the German expectations gauge but showed a surprising recovery in the current situation index, possibly due to the market-friendly French election results.
    • Eurozone Expectations Survey: Contracted, indicating a loss of momentum in activity sentiment over the past month.
  • Growth Outlook:
    • Eurozone Growth: Cooling eurozone growth outlook and increasing concerns about the French fiscal situation amid political gridlock are likely to weigh on EUR/USD.
  • ECB Meeting Expectations:
    • Guidance: ING expects the ECB Governing Council to refrain from offering new guidance at the upcoming meeting.
    • Market Impact: The market impact of the meeting is expected to be limited, with continued ECB caution suggesting modest bullish risks for EUR/USD.

Conclusion: ING anticipates EUR/USD is more likely to hit 1.08 than 1.10 in the coming weeks, driven by a cooling eurozone growth outlook and concerns about the French fiscal situation. The upcoming ECB meeting is not expected to significantly influence the market, reinforcing the likelihood of EUR/USD trending lower.

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This article was written by Adam Button at www.forexlive.com.



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