EUR: No help from joint defence spending – ING
|The ongoing discussion among EU leaders for a joint fund for defence spending is unlikely to drive much support for European currencies. That’s because the trigger is US President Donald Trump’s threat to scale back military support for NATO borders in Europe, which is hardly a net-positive development for local currencies, ING’s FX analysts Francesco Pesole notes.
EUR/USD to trade 1.02 in the end of the quarter
"It is equally far-fetched to hope any such EU coordination on common spending will be replicated on the fiscal side to counter US protectionism. The eurozone’s structural unpreparedness to face the economic consequences of Trump’s tariffs continues to form the basis of our bearish EUR view. Market pricing on the European Central Bank is around -75bp for year-end, but we think four more cuts this year (to 1.75%) will be warranted."
"EUR/USD has obliterated the negative risk premium related to US tariffs. Remember in mid-January that amounted to 3% of undervaluation, according to our short-term fair value model. It seems that the Ukraine-Russia peace negotiations have offset the tariff threat in FX."
"However, the latter likely have more tangible implications for the ECB, the economy, and by extension the euro, and we therefore favour a lower EUR/USD. Our forecast for the end of this quarter is 1.02."
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.