We were caught off guard by the main message from ECB President Christine Lagarde yesterday that the easing cycle was nearing its conclusion, ING's FX analyst Chris Turner notes.
1.1330/1350 may be the limit of the EUR/USD sell-off
"The terminal rate for the ECB easing cycle was subsequently priced 11bp higher, with 1m EUR ESTR priced one year forward now at 1.71%. This compares to the extreme of 1.40% in mid-April. The market still prices a further 25bp ECB cut later this year, but this has now been pushed back to October from September. ECB confidence in the modest growth cycle into 2026 and 2027 is a modest euro-positive."
EUR/USD came close to 1.1500 on those Lagarde remarks yesterday. As above, we're going to need quite a soft set of US data today to break that 1.1500 barrier above which the April 1.1575 high comes into play. We suspect 1.1330/1350 may be the limit of the EUR/USD sell-off should US data not be as weak as the market is positioned for.
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