Euro: Schnabel’s upbeat tone supports against US Dollar – ING
Chris Turner at ING highlights that Eurozone data continue to surprise positively and ECB’s Isabel Schnabel now sees growth risks possibly to the upside.
Chris Turner of ING notes that the Eurozone continues to outperform expectations with positive economic data. ECB President Isabel Schnabel now anticipates potential upside growth risks. This outlook supports the expectation of a 25bp interest rate hike to 2.50% in September and another hike next year. Euro/US Dollar is predicted to stay at the 1.1650/60 support level and move towards 1.1700/1710.
The Eurozone economy has proven resilient despite rising energy prices this year. Schnabel's remarks indicate that the ECB may characterize growth risks as upside at the September meeting. This should solidify expectations for the rate hike and may maintain market pricing for another 25bp hike early next year. Being a procyclical currency, improved growth prospects are beneficial for the Euro.
If there are no unexpected positive moves in US core PCE data today, the team favors EUR/USD staying at the 1.1650/60 support and heading back to the 1.1700/1710 area.
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