Euro: Hawkish ECB limits decline against US Dollar - ING

Support around 1.1200 is the level EUR/USD is seeking to establish following a strong opening to the week, according to ING’s Francesco Pesole. Although a Democratic sweep could lend support, he expects no substantial shift in sentiment. The Euro continues to carry a risk premium amid persistent French spread premia and high energy prices. Meanwhile, recent hawkish commentary from the European Central Bank (ECB) signals that at least one further rate rise is needed.

Euro Retains Risk Premium as ECB Maintains Hawkish Tone

"EUR/USD is looking to establish support at 1.1200 after a good start to the week. A Democratic sweep at the midterms today could help, but we don’t expect radical mood changes in the pair."

"French spreads didn’t benefit from lower oil prices yesterday, signalling levels above 150bp are the new normal now. It therefore remains hard for the euro to shake out the lingering risk premium, and much more tangible progress is needed for oil to trade sustainably lower from here."

"In the eurozone, focus will be on a number of ECB speakers today. Since last week’s meeting, we’ve heard some hawkish comments, endorsing market expectations that at least another hike is needed."

"Elevated energy prices suggest there is little room for a clear dovish current to emerge yet."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)