EUR: When the dust settles, EUR/USD should trade higher – ING

FXStreet Insights Team FXStreet

EUR/USD has finally found some support on the softer US rates story. EUR vs. USD two-year swap differentials have narrowed dramatically – from 113bp last Thursday to 83bp today. Weaker global growth is not good for the pro-cyclical Euro (EUR), but the fact that the 'US exceptionalism' narrative could be coming back to earth with a bump should be EUR/USD supportive, ING’s FX strategist Chris Turner notes.

EUR/USD to trade up towards 1.10

“Were it not for the heavy sell-off in equities, yield differentials would make a case for EUR/USD to be trading well above 1.10 now. We think this is the direction of travel once the risk environment stabilises. In terms of the risk environment, we are keeping our eye on measures of financial risks such as the three-month Ted Spread (Libor over US Treasury bills) and also on the three-month EUR:USD cross-currency basis swap.”

“It is a quiet week for eurozone data. Look out for the August Sentix investor survey today - although that was taken before the recent rout in equity markets. Overall we think EUR/USD should be able to press the 1.0950/80 region and break above 1.10 – especially if the Fed starts to acknowledge that action is required.”

“Elsewhere EUR/CHF continues to be hit. Noticeably the market is not pricing the Swiss policy rate below 0.50%. This means that lower interest rates in the rest of the world are converging on Switzerland. The Swiss National Bank will not like EUR/CHF at these levels and may well be intervening. But it is very hard to fight this current EUR/CHF bear trend.”

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 hits multi-week tops around 1.3560

GBP/USD gathers fresh steam and advances to new three-month peaks near the 1.3560 zone on Friday. Cable’s sharp move higher comes after three daily drops in a row and follows the increasing selling pressure hurting the Greenback.

EUR/USD pops to fresh two-month highs, targets 1.1600

EUR/USD advances markedly, revisiting the upper 1.1500s for the first time since mid-June. The pair’s sharp uptick comes on the back of a strong retracement in the US Dollar amid BoJ intervention chatter and despite steady uncertainty in the Middle East.

Gold picks up pace, approaches $4,400

Gold rebounds toward the $4,400 mark per troy ounce on Friday, reversing the previous day’s pullback. The precious metal’s recovery comes as fresh and intense weakness keep weighing on the US Dollar, while traders keep assessing easing expectations of an imminent Fed interest rate hike and the situation from the Middle East.

Pi Network Price Forecast: PI extends consolidation as bulls eye $0.10

Pi Network (PI) price holds steady on Friday, maintaining a consolidating tone for three consecutive days. Mild retail strength in the PI token remains stable, with Open Interest above $9 million, while social buzz eases. PI token’s technical outlook is mixed, as bearish momentum wanes to neutral, with bulls eyeing the $0.1000 psychological level.

Weekly focus: Some relief in US inflation concerns

Actual inflation data for July came out as expected with a 0.1% m/m increase in headline CPI and 0.2% excluding food and energy. Annual headline inflation remains too high at 3.4% and means that wage earners are experiencing stagnating spending power at best, and core inflation is a bit higher than the inflation target of two percent would suggest.

Why is Crude Oil priced for a reopening the ships haven't made?

Fourteen vessels crossed the Strait of Hormuz on Tuesday. Before the war, the count ran near 120 a day. In the sessions since the waterway was publicly declared open, Brent has drifted back to $87 and West Texas Intermediate (WTI) to $81, both a little lower again on Wednesday, with daily momentum on each unwound from the top of its range in late July to the low twenties now.