Synopsis:

ING maintains a bullish stance on EUR/USD, confident in a near-term break above 1.10, driven by market dynamics and expectations of a softer USD ahead of a possible 50bp Fed cut in September.

Key Points:

1. Bullish EUR/USD Outlook:

   • ING acknowledges that their positive view on EUR/USD is not driven by eurozone growth optimism, but rather by market pricing and the resilience of inflation, which has kept the EUR curve from a significant dovish repricing.

2. Focus on Risk Sentiment and Fed Expectations:

   • Improving risk sentiment following recent market selloffs is seen as a key factor supporting EUR/USD. Additionally, expectations of a softer USD, influenced by a potential 50bp Fed rate cut in September, bolster ING's confidence in a break above 1.10.

Conclusion:

ING remains bullish on EUR/USD, anticipating a move above 1.10 in the near term, supported by resilient eurozone inflation, improving risk sentiment, and expectations of a softer USD leading into a potential September Fed rate cut.