EUR/USD: Cyclical versus structural challenges – ING

FXStreet Insights Team FXStreet

The dollar is doing its best to unwind April's sharp losses, ING's FX analysts Francesco Pesole and Chris Turner note.

Support can be found at 1.09/1.10 now

"The temporary reductions in tariffs – pointing at room for negotiation – have helped a 5% risk premium come out of the dollar. But this year's rally in EUR/USD was not entirely driven by trade. EU fiscal stimulus drove a good part of the Feb/March rally and should be reason enough for support to be found at 1.09/1.10 now."

"The market's pricing of just 55bp of Fed rate cuts this year seems quite modest now. We think the Fed could start with a 25bp rate cut in September and bring the policy rate down towards the 3.50% area next year. The European Central Bank will likely cut by 25bp on two occasions – probably in June and September."

"Evidence on the structural de-dollarisation theme will be hard to come by, but the theme will undoubtedly weigh on the dollar."

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