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May 16 - 02:55 PM

ING: Cautious Outlook on EUR/USD Reaching 1.10

By eFXdata  —  May 16 - 01:30 PM

Synopsis:

ING provides a cautious perspective on the near-term potential of EUR/USD hitting the 1.10 mark, emphasizing the current market dynamics and economic indicators from the US and the Eurozone. Despite a recent rally, the likelihood of significant further appreciation in the short term is limited due to persistent inflation concerns in the US and policy expectations for the ECB.

Key Points:

  • Recent USD Weakness: EUR/USD has experienced a 1% increase this week due to a general decline in the USD. However, the Euro’s performance is relatively subdued compared to other G10 currencies, reflecting its lower correlation with short-term US rate expectations.
  • Resistance Levels: While 1.0900 may not pose strong resistance if upcoming US data weakens the dollar further, the threshold of 1.1000 appears premature for the near future.
  • Eurozone and ECB Impact: The expected ECB rate cut in June is fully priced in, offering no surprises. Current data from the Eurozone suggests the ECB's future messaging might lean more towards data-dependency rather than additional dovishness.

Conclusion:

Given the mixed economic signals from both the US and Eurozone, ING advises caution regarding EUR/USD’s potential to reach 1.10 soon. The bank highlights the importance of upcoming US economic data and ECB communications, suggesting that significant euro appreciation might be constrained in the immediate term.

Source:
ING Research/Market Commentary

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