EUR/USD: Downside risks toward 1.10 – ING
Recent commentary from ING underscores the bearish sentiment surrounding the Euro as central bank communications diverge notably. The Fed's ongoing tightening stance contrasts sharply with the ECB's more cautious approach, thus contributing to widening swap differentials that favor the Dollar. As a result, this backdrop suggests EUR/USD could slide towards the 1.10 mark in the near term—a level not seen since early November.
Where it sits in our coverage
Our current EUR/USD consensus stands at 1.1700, with expectations ranging from 1.1000 to 1.2000 across firms. Notably, RBC and Commerzbank are at the higher end of the spectrum with targets of 1.2000 for Dec26, while HSBC suggests a cautious lower outlook at 1.1000. ING’s analysis positions them in line with the downward pressure prevailing on the Euro, making their bearish forecast quite relevant.
How firms align
Several firms have recently adjusted their targets, influencing market sentiment. For instance, Mizuho has lowered their Mar26 target to 1.1300, reflecting a more pessimistic view, while Scotiabank maintains a moderate stance at 1.1734, above current spot levels. The divergence in expectations illustrates a fragmented outlook among major players, with ING’s bearish tone aligning closely with Mizuho’s adjusted target.
What the data shows
Recent revisions highlight a softening consensus, particularly from Mizuho and Rabobank, which both revised their targets downward in the past weeks. This shift suggests a collective consciousness among firms leaning bearish on the Euro, reinforcing the risks associated with a further decline toward the 1.10 level noted by ING. Furthermore, insights from /research/eurusd-ecb-rate-path indicate a growing gap between expected spot levels and current trading action, emphasizing heightened volatility risks.
Key takeaways
- 01EUR/USD faces pressure from diverging Fed and ECB policies, eyeing 1.10 support.
- 02Traders should watch swap differential dynamics closely for directional cues.
- 03ING's outlook aligns with recent forecasts showing bearish momentum toward 1.10.
- 04Potential rate cuts from the ECB could amplify a move lower.
Market implications
Market participants should be vigilant for any signs of changes in central bank communications, particularly from both the Fed and ECB. A decisive break below 1.10 could signal an intensified bearish trend, aligning with our consensus target of 1.1700. Upcoming ECB statements on monetary policy will be pivotal in establishing further price direction.
Risks to this view
A shift in tone from the ECB signaling a more hawkish approach could quickly negate the current bearish sentiment on the Euro. Additionally, if US economic data illustrates robust growth leading to sustained Fed tightening, this could bolster the Dollar further and lead to a counter trend in EUR/USD.
Sentiment by currency
USD+EUR JPY~GBP~Composite USD score: +0.70
Sources & References
How we cover this story
Other coverage on this pair
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EUR/USD Price Forecast: Declines below 1.1100, negative outlook remains intact under 100-day SMA
ECB caution pressures EUR below 100-day SMA; consolidation risk extends if sub-1.1080 holds through European close.
Morning briefing: EUR/USD can decline below 1.1100
87% December hike pricing on stronger CPI supports USD strength; EUR/USD breakdown below 1.1100 flags potential shift in rate differential momentum.