EUR/USD is enjoying a brief correction as some of the ECB hawks speculate whether global fragmentation (i.e. shortening supply chains and trade wars) will be inflationary and require higher interest rates, notes Chris Turner, FX analyst at ING.
EUR/USD upward correction will be limited
“These were the thoughts of the ECB’s Joachim Nagel yesterday – comments that helped reduce the two-year EUR:USD swap spread by around 10bps and saw EUR/USD correct to 1.06.”
“As for rate differentials, the market currently prices 10bp of Fed cuts in December (we expect 25bp) and 31bp of ECB cuts (we expect 50bp). Of course, if the Fed cuts 25bp and the ECB alone cuts 25bps, there could be a bit of upside for EUR/USD amid the seasonal dollar patterns we discussed earlier.”
“At the moment, however, we do not see a compelling case for EUR/USD to correct much higher and even a move to 1.0660/65 would still be consistent with a short-term downtrend. Expect another quiet day for EUR/ USD with a focus on the US Treasury election, as discussed above.”
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
