On Tuesday, ING analysts suggested that the EUR/USD currency pair appears to be consolidating with the potential to reach new lows. This perspective follows comments from the European Central Bank's (ECB) Vice President Luis de Guindos, indicating a likely rate cut in June, provided there are no new economic shocks. De Guindos emphasized the importance of the Federal Reserve's policies on the global economy and the euro area, acknowledging the impact of EUR/USD exchange rates on ECB decision-making.
The bank's analysts pointed out that the ECB's stance does not strongly assert its independence in monetary policy decisions. The analysts also noted the lack of clarity regarding the scale of the ECB's upcoming easing cycle. Market expectations, reflected in the forward ESTR curve, price the terminal rate at around 2.25% in two to three years, aligning with discussions about the eurozone's real neutral rate.
Today, ING anticipates modest improvements in the preliminary Purchasing Managers' Index (PMI) readings for the eurozone, Germany, and France. Given that weaker PMI figures had previously affected the euro's value last autumn, any recovery could offer some support to the currency. The analysts expect to see this support more distinctly in the EUR/GBP pair rather than in the EUR/USD exchange rate.
Technically, the currency pair is facing resistance, with the analysts forecasting that levels at 1.0680/1.0700 will likely cap intra-day gains. This technical outlook supports the anticipation of a potential downward movement for the EUR/USD in the near term.
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