ING’s Francesco Pesole says EUR/USD is trading close to its short-term fair value, while expectations for improving German ZEW data and the lingering impact of last week’s hawkish ECB hike offer some support to the Euro. However, he warns that a risk-off reaction to a hawkish Fed hike could quickly push EUR/USD towards ING’s 1.150 short-term target, given the pair’s high sensitivity to global equities and short-term rates.
Fed risk to Euro resilience
“This morning’s ZEW in Germany is expected to keep improving. Consensus is looking at a jump from 34 to 40 in the expectations gauge and from -61 to -52 in the current situation one. That’s effectively the only data release with any market-impact potential this week – unless final August CPI prints show large revisions.”
“Anyway, the echo of last week’s hawkish ECB hike remains a more relevant driver for any euro resilience at this stage.”
“Our models suggest EUR/USD is close to its short-term fair value model, slightly leaning towards undervaluation. That said, global equities and short-term rates have the highest betas on EUR/USD at the moment: a risk-off, hawkish hike by the Fed tomorrow could easily take the pair to our 1.150 short-term target.”
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
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