Euro: Data-driven range trade into Q3 against US Dollar – ING

Chris Turner at ING writes that EUR/USD bounced modestly after the FOMC but was constrained by higher long-dated US yields and pressure on US growth stocks. ING expects the Federal Reserve (Fed) to stay on hold in September, projecting EUR/USD near 1.17 by end-Q3, while in the near term the pair is seen trading in a 1.14–1.15 range, guided by Eurozone GDP and inflation data.

Fed hold view supports Euro outlook

"EUR/USD enjoyed a modest bounce after the Fed press conference, but probably got caught in the crosscurrents."

"The drop in short-dated US real yields was a clear EUR/USD positive, but the sell-off in long-dated US rates and the pressure it put on growth stocks in the S&P 500 probably capped the EUR/USD move. Ultimately, the ING house call is that the Fed does not hike in September and EUR/USD ends the third quarter near 1.17."

"But high energy prices and a strong US economy make that Fed decision in September a very close call. Over the shorter term, we expect EUR/USD probably to trade out a 1.14-1.15 range and take its cue from the data."

"Europe today will see its first look at second quarter GDP prints and also indications of July inflation. Weak growth (the eurozone is expected at 0.2% quarter-on-quarter) probably will not stand in the way of an ECB hike in September, which is more than 90% priced. An uptick in July inflation data today and high oil prices should keep short-dated euro rates supported."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)