EUR/USD: Downside risks toward 1.10 – ING
ING’s Francesco Pesole highlights that divergent central bank rhetoric between the Federal Reserve and European Central Bank is weighing on the Euro against the Dollar. Wider two-year swap differentials favour USD, leaving EUR/USD at risk of testing 1.100 in coming days. ING expects that level to offer solid support, arguing a decisive break below 1.100 would likely require markets to price a…
ING’s Francesco Pesole points out that the disparity in central bank messaging between the Federal Reserve and the European Central Bank is putting downward pressure on the EUR/USD exchange rate. The widening two-year swap differentials support the US Dollar, which could push the EUR/USD pair towards the 1.100 mark in the near future.
ING views this level as a strong support, stating that a break below 1.100 may necessitate markets pricing in a 50 basis point Federal Reserve hike in December. This differentiation underscores the current EUR/USD narrative, as the widening two-year swap rate differential has grown by around 15 basis points over the past five sessions, indicating a greater potential for further adjustment in front-end USD rates compared to EUR rates in the near term.
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