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- More downside to EUR - ING
More downside to EUR - ING
ING analysts see downside risk to EUR/USD coming from the ECB meeting.
- "Despite the market already pricing a 40% probability of a 10bp cut this week, more than one 10bp cut by September and close to 20bp overall easing by the end of this year, we see a downside risk to EUR/USD coming from the ECB meeting this Thursday. This is because:
- The ECB is likely to change the forward guidance and signal the upcoming cuts (in September and potentially beyond), thus cementing the markets' dovish expectations, and
- President Draghi is likely to deliver a dovish press conference, with a potential hint at QE.
- The latter in particular should be a negative factor for EUR over the coming months as the expectations for ECB QE will continue to build.
- On a short term basis, EUR/USD currently does not exert any meaningful risk premia. Coupled with the fairly light short EUR/USD positioning, there is scope for EUR/USD downside stemming from the dovish press conference (the short-term effect – coming days) and a further build-up of ECB QE expectations (the medium-term effect – coming months)."
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