Euro: Limited upside against US Dollar on fully priced ECB – ING

FXStreet Insights Team FXStreet

ING’s Chris Turner argues that with a 25bp ECB hike and further tightening already priced, the Euro faces a high bar for gains. Markets discount about 75bp of tightening through early next year. Without a clear hint of another hike in July, he sees limited scope for higher EUR swap rates, with EUR/USD capped near 1.1565/75 and vulnerable towards 1.1500 on strong US PPI.

Euro struggles with aggressive pricing

"The market expects a hawkish ECB meeting today, including a 25bp hike in the deposit rate to 2.25% and plenty of hawkish rhetoric."

"This means that today's hike is fully priced into money markets, with another 25bp hike priced by September."

"Pricing a 75bp tightening cycle in response to a stagflationary shock may be as far as pricing can go at the moment."

"Unless the ECB hints that it might need to hike again in July (8bp is priced so far), the prospects for higher short-term EUR swap rates to lift the euro today look limited."

"Short-term resistance at 1.1565/75 may be enough to contain the EUR/USD upside today."

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

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.

AUD/USD extends the range play above 0.7200 as traders await US inflation data

AUD/USD is seen extending its consolidative price move above 0.7200 during the Asian session on Thursday amid mixed cues. Rising RBA rate-hike bets keep the Aussie close to its highest level since May 14. However, hawkish Fed expectations and escalating US-Iran tensions offer some support to the US Dollar, capping the currency pair as traders await US inflation figures.

USD/JPY consolidates around 153.50 as bears turn cautious ahead of US inflation

USD/JPY stabilizes above 153.50 during the Asian session on Thursday, but remains near a seven-month low set earlier this week as hawkish BoJ repricing continues to underpin the Japanese Yen. Meanwhile, rising September Fed rate-hike bets and escalating US-Iran tensions help ease US Dollar selling pressure, offering some support to the currency pair ahead of US inflation figures.

Gold regains balance above $4,400

Gold rebounds on Wednesday, snapping a three-day losing streak and reclaiming the are beyond the key $4,400 mark per troy ounce. The precious metal’s bounce comes amid further selling pressure on the US Dollar and steady uncertainty on the geopolitical front.

Oil surge drives Equity rout

The traditional September selling in equities really seems to be taking hold thanks to higher oil prices, says Chris Beauchamp, Chief Market Analyst at online trading and investing platform IG. The second oil surge in a year has really begun to drag stock markets lower, as it combines with pre-CPI anxiety among investors who already regard next week’s Fed meeting with plenty of trepidation.

Jobs opened the door for the Fed — inflation decides whether it walks through

The latest US jobs report did not end the debate over the Federal Reserve’s (Fed) next move. It may have done something more subtle: it gave policymakers permission to keep their options open. After months of softer labour market signals, August delivered a stronger-than-expected rebound.

Venezuela’s 65-billion-barrel Oil deal could reshape America’s inflation fight

The United States (US) has secured unprecedented access to part of Venezuela’s vast Oil reserves. The timing is particularly significant as the war with Iran is disrupting Middle Eastern supplies, keeping energy prices elevated and reviving concerns about inflation.