EUR: Peak central bank action in Europe – ING

The eurozone’s dependence on energy price exports should put a curb on EUR/USD upside in our view, ING's FX analyst Francesco Pesole notes.

Short-term fair value is just below 1.110

"We had already argued before the Israel-Iran conflict began that moves beyond 1.1600 started to look too stretched based on previous peaks of misvaluation. At the time of writing, the short-term fair value is just below 1.110 according to our model, and moves below 1.1640 would send the pair beyond the three-standard-deviation upper bound."

"Anyway, price action in the coming days will be heavily dependent on oil market volatility and the USD moves. On the eurozone side, the main highlights are the ZEW survey results out tomorrow, and a few speeches by the European Central Bank's Governing Council members. Today, we’ll hear from both sides of the spectrum: hawk Joachim Nagel and dove Piero Cipollone."

"Expect a lot of action in other European central banks. The Riksbank (Wednesday) and the Swiss National Bank (Thursday) are both expected to cut rates by 25bp, although for the former, it is a closer call in light of the latest oil price shocks. Expect holds by the Bank of England and Norges Bank on Thursday."