Economists at ING are revising their 2023-2024 EUR/USD profile substantially higher.3Q and 4Q could prove trickier for EUR/USD
“Bearing in mind the importance of EUR/USD in driving FX trends globally, we no longer feel we can justify a sub-consensus profile over the coming years. Instead, we expect EUR/USD to work its way back to medium-term fair value, now around the 1.15 area.”
“In terms of a quarterly profile this year, a good proportion of the year’s EUR/USD gains could come in the second quarter when we expect US core inflation to fall sharply, allowing the short end of the US yield curve to adjust lower too.”
“2Q should also be the period when China re-opening trends gain a further leg higher. However, 3Q and 4Q could prove trickier for EUR/USD: the third quarter on the basis that the extension of the US debt ceiling could become a very contentious political debate around that period and be bad for the risk environment and the fourth on the basis that higher energy prices could again hit the Euro.”
EUR/USD stabilized above 1.0800 in a quiet start to the week
After hitting a fresh multi-month high of 1.0873, EUR/USD retreated, although buyers defend the 1.0800 mark. A holiday in the US results in a quiet consolidation across the FX board.
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GBP/USD struggles to extend gains on Monday and trades below the 1.2200 mark. The US Dollar sustains its rebound, despite bets for smaller Fed rate hikes, as risk sentiment turns sour. Recession fears weigh on Cable ahead of BoE Bailey’s testimony.
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