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Jan 28 - 06:55 PM

ING: EUR/USD to Fall by Another 1% in the Near-Term

By eFXdata  —  Jan 28 - 04:00 PM

Synopsis:

ING expects EUR/USD to fall by another 1% in the near term, driven by resurging tariff risks and equity market volatility. A dovish ECB and lack of bullish domestic drivers for the euro further support this outlook.

Key Points:

  1. Tariff Risks Dominate:

    • The US Treasury’s active planning around tariffs has heightened fears of a broader trade conflict, shrinking upside potential for the euro.
    • ING’s high-frequency fair value model indicates EUR/USD’s tariff-related undervaluation has widened to 1.8%, up from 1% yesterday, with potential to reach 3.0% as seen earlier in January.
  2. Domestic Drivers Weaken the Euro:

    • The euro remains vulnerable due to the lack of a clear domestic bullish catalyst.
    • ING expects the ECB to deliver dovish guidance at its upcoming meeting, adding to downside pressure.
  3. Short-Term Balance of Risks:

    • Tariff-related news has shifted risks to the downside for EUR/USD, with a return below the 1.0400 level appearing warranted.

Conclusion:

ING sees the combination of heightened tariff risks, equity market volatility, and a dovish ECB as likely to push EUR/USD down by an additional 1%, reinforcing bearish momentum in the near term.

Source:
ING Research/Market Commentary

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