EUR: Position adjustment – ING

EUR/USD was largely unchanged on yesterday's European Central Bank event risk despite President Christine Lagarde not sounding extremely dovish, with a slightly weaker euro only at the end of the trading session, ING’s FX analyst Chris Turner notes.

1.0450-1.0550 may prove the extremes of the short-term range

“The direction of travel is lower for eurozone rates and rates will not necessarily be stopping at neutral (2.00/.2.25%). Some might note the sell-off in eurozone bond markets and especially the widening of the Italian:German sovereign spread. Yet this spread had been exceptionally tight and the widening looks profit taking/position adjustment rather than any view that the ECB is blind to the looming eurozone slowdown.”

“EUR/USD largely remains glued to 1.05 and we doubt it needs to stray too far from that level today. Next Wednesday's FOMC meeting is probably the next big test of the dollar now and we very much doubt those short EUR/USD will need to cut what is a carry-positive position. 1.0450-1.0550 may prove the extremes of the short-term range.”

“Elsewhere, the Swiss National Bank did go for the more aggressive 50bp rate cut option. New SNB President, Martin Schlegel, was honest in saying the SNB does not like negative rates but is prepared to use them if necessary. We are not yet fully subscribed to the SNB negative rate story next year but in any case maintain the position that the SNB will not be able to cut as deeply as the ECB and that EUR/CHF will trend lower.”