This week's risk rally looks to be fading as we close in on the Jackson Hole event. EUR/USD is trading below 1.1750, off the highs and ahead of the German IFO Business Climate release. A moderate decrease is on the cards but the pair should stay above the 1.17 level, according to economists at ING.
See – EUR/USD: Year-end forecast stands at 1.18 – ABN Amro
When will German elections start to play a role?
“EUR/USD looks to be stalling near the 1.1750 area and we do not see a big catalyst for further gains. One wild card is the result of the upcoming German elections. With the SPD nudging ahead in the polls could we see expectations of looser fiscal policy drive European yields and the euro higher?”
“For today, the focus will be on the German August IFO. German manufacturers continue to struggle with supply chain challenges and the IFO expectations component is expected to correct to 100 from 101.2. Any larger than expected drop here could marginally weigh on EUR/USD, though 1.1700 support should hold in quiet markets.”
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