Euro: Fair value falls on oil and Fed pressure against US Dollar - ING
Francesco Pesole at ING highlights that EUR/USD has broken lower after a more hawkish‑than‑expected Federal Reserve meeting, with the two‑year swap differential at its widest since July.
ING analyst Francesco Pesole reports that EUR/USD has fallen following a more hawkish-than-anticipated Federal Reserve meeting. The two-year swap differential is at its widest since July. Despite the ECB's stance offering some support, higher oil prices have led ING to lower its short-term fair value estimate for EUR/USD to 1.150, indicating downside risks persist.
Pesole notes that the Fed's more hawkish outlook exceeded expectations, prompting a significant drop in EUR/USD. While the ECB's hawkish message provides some support, higher oil prices have driven the euro's value down. ING's model now shows a short-term fair value of 1.150, a 1% decrease from a week ago. Further moves in front-end rates, oil or global equities could quickly push the fair value lower.
There is little chance of the euro rebounding at this stage, especially not from a eurozone perspective, except for a correction in energy prices. There is no strong technical support in sight before the 1.132-1.135 area, marking the bottom of the summer. EUR/USD remains under pressure from oil prices and risk sentiment.
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