Euro Sees Upside as Dollar Shift Creates Near-Term Risks
The Euro has seen an upside in value after a significant shift in dollar momentum. According to ING's Francesco Pesole, this is due to broad-based pressure on the US currency.
Eurozone data released recently showed stronger-than-expected growth of 0.4% quarter-over-quarter and hotter inflation readings in Germany and Spain. However, despite these positive indicators, the Euro underperformed some G10 peers, excluding its recent gains.
The European Central Bank has a September hike largely priced in, but markets are waiting for stronger signals from oil prices or inflation to push front-end EUR rates higher. Pesole notes that with consensus expectations at 2.9% for headline and 2.4% for core Eurozone-wide inflation data due today, upside room for front-end EUR rates may be contained.
Pesole sees near-term risks tilted to the upside for EUR/USD but warns that a move above 1.160 may not be sustainable without further USD repricing and easing of Middle East tensions.