EUR/USD is eyeing 1.11 again after the combined support of a not-dovish-enough European Central Bank and rising dovish bets on the Fed, ING’s FX strategist Francesco Pesole notes.
There is no strong technical resistance before 1.120
“It is abundantly clear that President Christine Lagarde is fine with keeping communication quiet and predictable at this stage, offering little to no guidance. At the press conference, she merely admitted the direction for policy rates is ‘pretty obvious’ (i.e., more cuts), but what truly resonated with markets is the firm reiteration of data dependency.”
“The EUR OIS curve is now pricing in some 5-6bp higher year-end deposit rate compared to yesterday: 3.10% from the current 3.50%. A 50bp move by the Fed can surely convince markets to price in 50bp of easing in the eurozone too this year, but the net impact on the EUR:USD swap rate gap would be neutral, so that support for EUR/USD from a rates perspective should remain intact.”
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