Euro Edges Higher on Softening Greenback and Elevated Inflation

According to ING's Chris Turner, the Euro remains well-supported against the US Dollar due to the dollar's softening. He notes that a mild eurozone growth in August PMIs and elevated inflation expectations keep the case for another European Central Bank (ECB) hike alive. The EUR/USD is expected to consolidate in the 1.1670-1.1710 range before potentially edging higher, although high natural gas prices remain a risk.

The ECB's Consumer Expectations Survey shows that three-year inflation expectations reached 3.0% in March and are expected to remain elevated at 2.8%. Turner also mentions that fiscal consolidation seems unlikely, as Washington wants to spread its pro-growth mindset to the entire G20 when finance ministers and central bank governors meet later this month.

With emerging market currencies performing well, ING prefers a continued gentle rise in EUR/USD. However, high natural gas prices remain a concern, but since the eurozone economy seems to be coping with these better now, EUR/USD can focus on the soft dollar story.