EUR: Testing the lows – ING
15.10.2024, 08:59

EUR: Testing the lows – ING

The euro is losing some ground ahead of Thursday’s European Central Bank meeting and has now made a decisive break below 1.090. The rewidening in rate differentials with the USD is clearly prompting a shift in strategic EUR/USD positioning, and CFTC data showed net-longs have declined from 13.5% to 5.9% of open interest since early September, ING’s FX strategist Francesco Pesole notes.

EUR/USD may edge back higher

“A more balanced positioning picture means EUR/USD can find some support in the dips. Incidentally, our models return a short-term fair value of around 1.093. USD might reconnect with lower oil and EUR/USD may edge back higher. Moving on, unless the ECB surprises with a hold or out-of-consensus guidance on Thursday, the direction for the pair will be set by US events in the next month or so.”

“In the UK, jobs figures released this morning did not send any unidirectional message to the Bank of England. Unemployment ticked lower, but that is not a highly reliable indicator, while wage growth excluding bonuses slowed as expected. It’s worth noting that the majority of sectors now have vacancy rates below pre-Covid averages when wage growth was around 3.5%, well below the current 5%.”

“Our UK economist believes there is room for a further adjustment lower in wage growth that will ultimately allow the BoE to cut with more confidence. Tomorrow’s UK CPI is the biggest event for sterling markets, and we see risks to the upside for EUR/GBP, which may retest the 0.8400 level.”

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