Euro: Gains capped against US Dollar by weak data – ING

ING’s Chris Turner says EUR/USD has held up thanks to a softer Dollar and strong Asian AI-related risk sentiment, but Eurozone activity data remain weak. He argues that expectations for European Central Bank (ECB) hikes this summer are preventing a drop toward 1.15. With high Oil prices and US inflation risks, Turner sees limited scope for EUR/USD to break above 1.18 and greater downside risk.

ECB support offsets soft Euro data

"EUR/USD has been holding up quite well, largely on the back of the recent pro-risk, softer dollar environment."

"The outlook for the euro has been less encouraging, however, where the activity data has been poor, and it is only the prospect of European Central Bank hikes this summer that is preventing EUR/USD from dropping back to 1.15."

"With oil prices staying high, expect the ECB to continue to talk tough and speeches by Christine Lagarde and Philip Lane this Wednesday may firm up the view that the ECB will hike 25bp on 11 June. That is currently priced with an 82% probability."

"Unless there is a breakthrough on a peace deal this week, we struggle to see EUR/USD breaking above 1.18 and see greater risk of sub 1.1700 driven by higher US prices and more hawkish Fed pricing."

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