EUR/USD looked expensive in light of wider rate differentials (in favor of the USD) and increasing risks coming from the Middle East and French politics. Ultimately, it was tensions between Israel, Lebanon and Iran that triggered a move below 1,110, but the other two factors also remain negative for the pair, notes Francesco Pesole, FX Strategist at ING.
EUR/USD prepares to retest 1.1000 in the near term
“French Prime Minister Michel Barnier faced a difficult first speech in Parliament, receiving criticism from both left and right factions as he laid out his policy plans. Despite a central commitment to fiscal consolidation, he delayed the plan to reduce the deficit within the EU’s 3% limit for two years, until 2029. That kept the OATs offered, and the 10-year spread with bunds close to 80 bps. Our rates team doubts there will be much relief at all. the view for French bonds.”
“On the rates side, short-term spreads are unlikely to sharply tighten again in favor of the EUR in the near term, as markets are already pricing in 70 bps by the end of the year from the Fed and The fall in eurozone inflation below yesterday’s 2% target means significant pressure on the ECB to continue cutting at the October meeting. We maintain our forecast that EUR/USD will retest 1.1000 in the near term. ”
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.
