EUR/USD is just about holding onto gains made over the last few days. Remember these gains have been delivered on the back of, i) some ECB pushback against a 50bp cut in December, ii) Friday's soft US jobs report and iii) yesterday's poll result in Iowa which suggested Harris might be performing better than expected, ING’s FX analyst Chris Turner notes.
“And assuming that a clear election result emerges this week, we are primed to deliver new multi-quarter EUR/USD forecasts – having kept a multi-quarter profile from the fourth quarter onwards flat at 1.10 from April this year.”
“The threat of Trump and protectionism has sharpened the senses in European political circles and may be hurrying German political leaders to compromise on the budget side. But for this week, expect the fall-out from US elections to dominate.”
“Ultimately, a Trump win without the House could be the worst scenario for EUR/USD by late 2025, where global growth would be finding no insulation from US tax cuts and the ECB might be forced to cut rates deeper into accommodative territory. It is after the European close tonight, but let's see whether the ECB's Isabel Schabel again pushes back against a 50bp ECB cut in December. Currently the market prices 29bp of cuts.”
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