Euro: Downside risks start to shrink against US Dollar – ING
Francesco Pesole at ING argues EUR/USD’s break below 1.140 has pushed the pair into stretched undervaluation versus their short-term fair value model, as rate differentials moved in favour of the Euro.
MUFG's Derek Halpenny explains that widening French OAT/Bund spreads and global fixed income risk aversion are contributing to the decline of the Euro against the US Dollar. Political and fiscal uncertainties in France, such as a significant consolidation plan and budget risks, are adversely affecting sentiment. MUFG identifies 1.1340 as a key support level for EUR/USD, with a breach potentially driving losses down to the 1.10-1.12 range.
The recent OAT/Bund spread widening to 110 basis points, the highest since 2012, appears to be driven by global investors' shift towards reducing duration and increased risk aversion in fixed income markets. Although no major ratings downgrade has occurred, French political risks and the upcoming 2027 budget are likely to intensify market risks for the Euro.
The 38.2% retracement support level, at 1.1340, is considered the next crucial point for EUR/USD, with a breach potentially triggering a further decline to the 1.10-1.12 range.
Written by urgent.news from FXStreet's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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