EUR: Risk premium can widen from here – ING
The shake-up in equity markets and resurging tariff risk are going to be much more relevant for EUR/USD compared to the widely anticipated 25bp cut and quite likely reiteration of a dovish-leaning guidance, ING's FX analyst Francesco Pesole notes.
Risks shift back to the downside for EUR/USD
"The tariff threat may be perceived more seriously given the Treasury’s active planning, and that materially shrinks the upside potential for the euro. Indeed, outside of a positioning-fuelled USD correction on the back of declining fears of global tariffs, the euro continues to lack any clear domestic bullish driver, as we expect a dovish ECB to confirm this week."
"Our high-frequency fair value model now shows EUR/USD undervaluation (i.e. tariff-related risk premium) having rewidened from 1% to 1.8% since yesterday morning. That undervaluation peaked at 3.0% in early January, meaning an additional 1%+ drop in EUR/USD regardless of any rates, equity or commodity could be warranted if markets proceed to price in a greater tariff risk."
"We think the short-term balance of risks has shifted back to the downside for EUR/USD following tariff-related news overnight and a return below 1.040 is warranted at this stage."
Reprinted from FXStreet_id，the copyright all reserved by the original author.
Disclaimer: The content above represents only the views of the author or guest. It does not represent any views or positions of FOLLOWME and does not mean that FOLLOWME agrees with its statement or description, nor does it constitute any investment advice. For all actions taken by visitors based on information provided by the FOLLOWME community, the community does not assume any form of liability unless otherwise expressly promised in writing.
FOLLOWME Trading Community Website: https://www.followme.com
Hot
No comment on record. Start new comment.