ING: The EUR
EUR/USD finally fell below the summer lows yesterday. Spot dropped temporarily to 1.1310-20 before paring some losses, trading at 1.1350 this morning. We flagged yesterday how dovish- leaning remarks by Christine Lagarde were leaving the euro in a more vulnerable position, but this drop in EUR/USD appears entirely dollar-driven. We don’t expect another big break lower, as we still think the Fed will hike next only in December. But if US data is hot, the Fed hikes in October and stays hawkish, EUR/USD would be ready for another bearish leap, with risks potentially extending all the way to 1.10. Even lower oil prices might not help, as markets may be quicker to price out ECB tightening than the Fed's. Let's see what French and German September CPI numbers look like this morning. Hotter-than- expected numbers like those released in Spain yesterday could prompt upcoming ECB speakers to offer a more hawkish tone, perhaps revamping bets on an October hike.
EUR/USD finally fell below the summer lows yesterday. 1350 this morning. We flagged yesterday how dovish- leaning remarks by Christine Lagarde were leaving the euro in a more vulnerable position, but this drop in EUR/USD appears entirely dollar-driven. We don’t expect another big break lower, as we still think the Fed will hike next only in December.
10. Even lower oil prices might not help, as markets may be quicker to price out ECB tightening than the Fed's. Let's see what French and German September CPI numbers look like this morning. Hotter-than- expected numbers like those released in Spain yesterday could prompt upcoming ECB speakers to offer a more hawkish tone, perhaps revamping bets on an October hike.