EUR/USD limps back below 1.10. Economists at ING analyze the pair’s outlook.
Markets too dovish?
The door is open for another hike by the ECB before the end of the year, even in September. Markets, however, are reluctant to support this scenario and only price in a 17 bps tightening by December, perhaps reading last week’s ECB messaging as a dovish tilt.
It is possible investors will want to hear more hawkishness from ECB members before aligning with the data’s indications and fully price in another hike. However, August is a quiet month for ECB speakers: we’ll hear from the dove Fabio Panetta later this week, and that will hardly help.
EUR/USD should be primarily driven by the Dollar leg and US data for the remainder of the week, and there are some downside risks to the 1.0900 handle.
