ING Sees Dovish Repricing Boosting EUR/USD Amid Lower Dollar Rates
ING has revised its European Central Bank forecast to expect another interest rate hike in December. The bank maintained its year-end target of 1.160 for EUR/USD.
The outlook shift from ING did not affect its euro-dollar forecast, as front-end swaps show similar pricing for both currencies. Markets have priced in a 33-37 basis points increase by year-end and 80-90 basis points by July for both currencies.
ING anticipates only one more rate hike from both the Federal Reserve and ECB this year, followed by an extended pause. The bank expects dovish repricing of similar magnitude for both central banks, which typically supports a slightly higher EUR/USD as lower dollar rates boost global risk sentiment.
The firm also sees declining energy prices supporting the euro-dollar pair. Lower energy costs represent an additional positive factor for EUR/USD performance.