EUR: Rate spread still points north – ING
EUR/USD dived below 1.090 on Thursday after US jobless claims data, but then rapidly rebounded as the initial move proved understandably overdone, ING’s FX strategist Francesco Pesole notes.
The case for a higher EUR/USD is intact
“The 2-year EUR:USD swap rate gap has only marginally re-widened to -104bp, meaning the case for a higher EUR/USD is still very much intact. The improvement in risk sentiment should incidentally favour a leg higher.”
“The risk is, if anything, that markets hold a more defensive view and tolerate an undervalued EUR/USD for longer ahead of the key US CPI risk event. Even in that scenario, we would think EUR/USD would flatten rather than materially depreciate given the favourable rate spread.”
“The eurozone calendar and ECB speaker schedule remain quiet, and we still look for 1.10 in the near term. We also continue to favour a EUR/GBP appreciation back above 0.860 despite yesterday’s risk-driven correction.”
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FXStreet Insights Team
FXStreet
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