The current environment allows some stark divergence between the European Central Bank (ECB) and the Federal Reserve (Fed) to play out. Subsequently, the EUR/USD is expected to test the 1.17 level, in the view of economists at ING.
ECB gets its way with the euro
“EUR/USD has come under steady pressure after the ECB shifted to a symmetrical 2.0% inflation target in late July. This comes at a time when the Fed is preparing to normalise policy. Recent comments from Vice Chair Clarida suggest the Fed could be ready to tighten in early 2023.”
“With US jobs numbers likely to improve into September, the US dollar can stay bid, EUR/USD pressing 1.17.”
“Our preference is for a 1.17-1.23 range into year-end (the dollar is seasonally weak at end of the year), but risks are clearly skewed lower.”
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