EUR/USD briefly nudged above 1.05 on Friday on news that Washington may potentially not be as aggressive on China tariffs as first thought, ING’s FX analyst Chris Turner notes.
Next catalysts for a move are the FOMC and ECB meetings
“Euro short-dated swap rates rose on the view that the European Central Bank may not have to cut as deeply. US short-dated swap rates fell on the news that tariffs might not be as inflationary and that the Fed could ease more. Consequently, the two-year EUR:USD swap differential narrowed in close to 165bp – the tightest since early November.”
“We view the above as corrective, and our quarterly profile of EUR/USD gradually trending towards the 1.01 area by year-end is partially built on the assumption that the above rate differential widens back out to 200bp. Let’s see.”
“Expect EUR/USD probably to be contained in a 1.0400-1.0500 range for the near term, with the next catalysts for a move being the FOMC and ECB meetings on Wednesday and Thursday respectively.”
Read the full article here
