ING Sees EUR/USD Recovery Room Despite US Dollar Surge

ING's FX model suggests that EUR/USD should be trading above 1.140, indicating that the recent euro sell-off has been excessive.

The main catalyst for the pair is expected to be September Eurozone inflation data, with individual country releases starting from Spain and aggregate eurozone figures scheduled for Friday.

ING FX Strategist Francesco Pesole notes that developments across bond markets, equities, and oil prices are discouraging an aggressive challenge to the ongoing dollar strength.

Pesole highlights the distinction between headline and core inflation dynamics, pointing to energy as the main driver of headline price gains.

The model-based view favors a stronger euro, with recent weakness seen as somewhat overdone.