EUR/USD Eyes 1.150 as Risks Rebalance Ahead of Fed Announcement

ING's Francesco Pesole believes that the Federal Reserve announcement could push EUR/USD towards its 1.150 target. According to him, below this level, risks become more balanced due to technical, short-term valuation, and rate differentials considerations. The Fed and ECB are seen holding rates steady, allowing for dovish repricing in EUR and USD curves that may put a floor under EUR/USD.

Pesole notes that energy prices have not yet had their full effect on the market, but once they do, it could lead to a significant move. He also points out that below 1.150, the risks become more balanced from a technical and short-term valuation perspective, with short-term rate differentials unable to accommodate big moves lower.

The EUR/GBP is trading higher after UK inflation figures came in line with consensus, showing no evidence of accelerating inflation in core and services. This may lead to a dovish message from the Bank of England tomorrow, tilting expectations towards a more dovish outcome than what the market currently expects.