Euro Faces Risk-Off Fallout from Hawkish Fed Decision
EUR/USD is trading near its short-term fair value, according to ING's Francesco Pesole. The Euro has some support from improving German ZEW data and last week's ECB hike, but the pair remains vulnerable to a hawkish Fed decision.
The market expects better-than-previous numbers in Germany's ZEW survey this morning, with consensus looking for a jump in expectations and current situation indicators. However, Pesole warns that if the Federal Reserve surprises with a more aggressive rate hike, the Euro could quickly lose ground against the US Dollar.
Pesole notes that EUR/USD has high sensitivity to global equities and short-term rates, which makes it susceptible to a risk-off reaction. He mentions ING's 1.150 target as a possible outcome if the Fed hikes interest rates significantly.