EUR: Awaiting some help from Beijing – ING
11.10.2024, 10:28

EUR: Awaiting some help from Beijing – ING

EUR/USD has stabilised in the 1.09-1.10 range, but continues to face downside risks as a USD:EUR two-year swap rate gap at 130bp is consistent with sub-1.09 levels, and Middle East tensions can easily add to the negatives for the pro-cyclical, oil-sensitive EUR.

China be important for EUR/USD’s tactical picture

“Weekend developments in China will likely be important for EUR/USD’s tactical picture given the euro tends to have a good response to positive China developments. Good news from Beijing can help build a floor at 1.090 early next week. The eurozone calendar is not offering many market inputs for the time being, and the ECB is in a quiet period ahead of next week’s meeting.”

“The latest ECB minutes did not give many insights about the October meeting, especially in light of recent inflation data surprises. While arguments against a rate cut shouldn’t be entirely dismissed, it would now take quite a lot of courage from the ECB to hold, given markets and the consensus are fully aligned for a 25bp reduction.”

“Elsewhere in Europe, the UK released some slightly softer-than-expected growth figures for August, with 3M/3M GDP having slowed to 0.2%. Industrial production for the same month came in quite soft, at -1.6% YoY. This is all second-tier data for the Bank of England and sterling has barely budged, but they might be contributing to the recent narrative that a dovish repricing in the Sonia curve is overdue. Still, some encouraging news on services CPI next week is needed to take EUR/GBP sustainably back above 0.84.”

 

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