EUR/USD was denied a move below 1.1300 overnight and enjoyed a small rebound in the Asian session. In the opinion of economists at ING, markets may continue to look at the dollar with favour in the coming weeks, dragging the world’s most popular currency pair down to the 1.12 level.
Markets received contrasting messages from the ECB
“While the minutes from the December meeting clearly highlighted growing concerns about inflation and a hawkish bloc within the Governing Council that is growing stronger and louder, President Lagarde argued in favour of a more cautious approach to tightening – especially compared to that of the Fed.”
“Lagarde is set to speak again today and we can reasonably expect more pushback against speculation the ECB will have to start hiking already this year, largely on the back of expectations that inflation will not prove as concerning later in the year as in other developed economies.”
“Our view is still that more Fed-induced dollar strength should keep some pressure on the pair, and a return to the 1.1200 November lows should be on the cards in the coming weeks.”
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