EUR/USD: Downside risks after hawkish ECB repricing – ING

FXStreet Insights Team FXStreet

ING strategist Francesco Pesole highlights that aggressive repricing of European Central Bank tightening, with three hikes now fully priced, may have gone too far. While EUR/USD has been supported by hawkish ECB news, he warns that elevated Oil prices, fragile risk sentiment and already stretched rate expectations leave the pair vulnerable to a downside correction back toward pre‑meeting levels.

Hawkish ECB pricing faces downside risks

"Watching central bank speakers may be even more important for the European Central Bank than for the Fed this week. Thursday’s report that the ECB is considering an April hike has caused a major repricing in EUR swaps, which now attach an 80% probability to April, with three hikes fully priced in by year-end."

"It still seems too hawkish to us, but we admit last week’s messaging was clearly hawkish and when a central bank tightens, it often delivers no fewer than two hikes. The longer oil prices remain at these elevated levels, the more realistic those hikes will be."

"However, given the size of the hawkish repricing, dovish comments can cause significant adjustments in front-end euro rates. Today, we’ll hear from a dove (Piero Cipollone) as well as Chief Economist Philip Lane. President Christine Lagarde is due to deliver remarks on Wednesday and there are plenty of other speakers to watch."

"On the data side, PMI and Ifo surveys will be the highlight this week. Consensus is for a moderate decline in both, but considering the size of the ZEW drop, risks are on the downside."

"EUR/USD has received support on hawkish ECB news, but with oil prices this elevated, risk sentiment unstable and markets already pricing in three ECB hikes, the risks look skewed to the downside. A correction to pre-ECB meeting 1.145 levels would confirm the FX market is not finding a sustainable anchor in the now tighter rate differentials."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

GBP/USD clings to multi-day peaks below 1.3500

GBP/USD trades with marked gains on Friday, now giving away some gains following an earlier surpass of the key 1.3500 yardstick. Indeed, Cable gathers fresh steam amid the strong offered stance in the Greenback, all after US NFP badly missed expectations in July.

EUR/USD: Post-NFP bounce falters around 1.1580

EUR/USD reverses Thursday’s decline and trades with solid gains in the 1.1560 region, or two-month peaks, on Friday. The pair’s firm performance comes in a context of a sharp correction in the US Dollar as investors continue to assess disheartening US NFP readings.

How Wall Street rigs the game [Video]

In this week’s Live from the Vault, Andrew Maguire is joined by Peter Antico and Sean Stone to discuss the Paradigm of Money - an in-depth expose of financial market corruption, from naked shorting to the two-tier system that protects Wall Street.

XRP Price Forecast: XRP nears critical $1.00 support

Ripple (XRP) remains pressured on Friday, trading around $1.03 at the time of writing. The token appears to hold this current level as support but lacks a catalyst to sustain a knee-jerk rebound toward the next key resistance at $1.10.

Is Gold about to enter its biggest bull run since 2020?

Gold has stormed back into the spotlight and its next move could leave late buyers chasing. On August 5, the yellow metal surged almost 7% – roughly $174 – to close near $4,308 an ounce, posting one of its biggest daily advances in recent history. A weaker U.S dollar, falling Treasury yields, changing Federal Reserve expectations and renewed safe-haven demand all struck at once.

9-3: Is the Federal Reserve’s vote tally Warsh's new forward guidance?

The rate did not move. Neither did the statement, and that’s the more interesting fact. Set the July 29 Federal Open Market Committee (FOMC) statement beside the one issued on June 17, and the two documents are identical apart from a single verb and a paragraph at the bottom naming three dissenters.