Synopsis:
ING sees EUR/USD consolidating within the 1.0770-1.0850 range at the start of the week following last week's sharp 4.4% rally—the biggest since March 2020. The next directional move could be driven by ECB speakers or progress on Germany’s proposed €500bn infrastructure fund, with volatility likely around coalition negotiations.
Key Points:
1️⃣ EUR/USD Consolidating After Historic Rally 📊
- Last week's 4.4% surge was the largest since the COVID market shock in March 2020.
- A period of stabilization is likely before the next catalyst emerges.
2️⃣ German Fiscal Talks Key for Euro Volatility 🇩🇪
- CDU leader Friedrich Merz is negotiating with the Greens on a €500bn infrastructure fund.
- A Bundestag vote is expected on March 18, followed by Bundesrat approval on March 21.
- Headlines on coalition progress could trigger volatility in EUR.
3️⃣ Limited European Data, ECB Speakers in Focus 🎙️
- March Sentix Investor Confidence survey released today.
- ING expects the ECB to pause rate cuts in April, while markets still price 17bp of easing.
4️⃣ Next EUR/USD Leg Needs Fresh Catalysts 🔍
- Further upside likely requires ECB hawkish signals or progress in Saudi Arabia’s peace talks.
- US macro/rates likely to play a lesser role in driving near-term moves.
Conclusion:
ING sees EUR/USD consolidating within 1.0770-1.0850 early this week, with the next leg higher dependent on ECB commentary or German fiscal progress. Political negotiations and market expectations for April’s ECB meeting will be key drivers of short-term volatility.
