ING’s Chris Turner argues that Euro fundamentals remain contained despite German regional election results highlighting political tensions for Chancellor Merz’s CDU. Solid Eurozone growth and investor confidence are offset by downside risks from this week’s ECB meeting. ING expects EUR/USD to hold a narrow 1.1580-1.1640 band with a slight downside bias.
Euro seen contained in tight ranges
“While not a major negative for the euro, Sunday’s election results in Saxony-Anhalt will serve as a reminder of the declining popularity of Chancellor Merz’s CDU party, and, if backed up by similar results in two further regional elections, raise tensions within the governing coalition.”
“So far, the German government’s infrastructure and defence spending plans seem to be paying dividends for German growth prospects and international investors will not want to see those interrupted.”
“On the subject of growth, today should see eurozone second-quarter growth confirmed at a decent 0.4% quarter-on-quarter figure and also see another decent increase in the Sentix investor confidence data.”
“The main event of the week, however, will be Thursday’s ECB meeting, where we see some downside risks to the euro.”
“Expect EUR/USD to trade a tight 1.1580-1.1640 range today, with our bias to the downside.”
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