EUR: To rise above 1.12 near-term – ING
19.09.2024, 08:56

EUR: To rise above 1.12 near-term – ING

The short-term rates picture continues to argue for a consolidation in the EUR/USD above 1.11, with some upside potential. If it wasn’t for the eurozone’s soft growth picture, EUR/USD would probably be trading closer to 1.13, but the short-term call is closer to 1.12 for EUR/USD, ING’s FX strategist Francesco Pesole notes.

The Thursday’s stage is set for quite a few ECB speakers

“Once the post-FOMC volatility settles, the short-term rates picture continues to argue for a consolidation in the pair above 1.11, with some upside potential. That was not just reinforced by the Fed’s larger-than-expected cut, but also by an increasingly vocal ECB hawkish front, which is preventing markets from pricing in another cut in the eurozone in October.”

“The EUR:USD 2-year swap spread has continued to shrink, now at -0.85bp. By comparison, that was -160bp in April, and -100bp a month ago. If it wasn’t for the eurozone’s soft growth picture, we would probably be trading closer to 1.13 now, based purely on rate differentials.”

“Today, the eurozone calendar doesn’t include any market-moving data, but quite a few ECB speakers. We will hear from one of the doves, Panetta, but also from the hawks Knot and Schnabel. Ultimately, the louder hawks should keep markets reluctant to price in more ECB easing, despite the Fed’s dovish influence.”

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