Real money flows fuel EUR/USD rally – ING
The EUR/USD rally appears driven by real money flows as investors hedge dollar exposure or repatriate US assets. While upcoming Fed easing and slower US growth could pressure the dollar further, the ECB’s rate cut to 1.75% may help limit euro gains, keeping the pair volatile within a 1.12–1.16 range, ING’s FX analysts Francesco Pesole and Chris Turner note.
Fed easing, lower growth weigh on dollar outlook
"Real money flows have been the big driver of the EUR/USD rally as investors either raise dollar hedge ratios or repatriate US assets completely. We are not major subscribers to the dollar having permanently lost its safe haven status, but acknowledge that lower US growth rates are coming and that Federal Reserve easing in the second half will hit the dollar broadly."
"We’re thinking EUR/USD could trade in a volatile 1.12-1.16 range this quarter, where renewed bouts of US equity selling can see new EUR/USD highs hit. Expect volatility to remain high. However, the euro is now getting very strong for the European Central Bank, and the deposit rate being cut to 1.75% should restrain EUR/USD a little".
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FXStreet Insights Team
FXStreet
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