Markets see EUR/USD’s rise in the upper half of the 1.09-1.10 range as the start of a longer-term uptrend. The target is a move towards 1.12 in the near term supported by a tighter rate differential and stabilised risk sentiment, notes Francesco Pesole, FX Strategist at ING.
An upward breakout is imminent
“Today’s US CPI could propel EUR/USD to a decisive break above 1.100. Last week, the pair briefly hovered above 1.10 before quickly falling to 1.0950. That could have been because markets were reluctant to sell the dollar aggressively ahead of the July PPI and CPI reports. We expect the CPI hurdle to be cleared without losses today.”
Interestingly, the Euro was not held back by Germany’s disappointing ZEW survey on Tuesday, another sign that weak Eurozone activity is probably already priced in. By the way, persistent inflation in the Eurozone does not really allow markets to price in more than 75bp of cuts by the European Central Bank by the end of the year. One could argue that even 75bp seems too dovish given the latest data.
Elsewhere in Europe, Sweden released July inflation figures this morning. CPIF core inflation slowed from 2.3% to 2.2% yoy versus expectations of 2.1%, but that shouldn’t stop the Riksbank from cutting rates by another 25bp next week. Our forecast for the rest of the year is for a 75bp easing including next week’s cut, but the risks are undoubtedly skewed towards 100bp, which is what the market is pricing in.
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.
