Don’t be fooled by lower salaries – ING

Euro bulls have been forced to overlook some weak activity indicators recently, and we doubt there is any expectation of a near-term recovery in the eurozone’s growth outlook, notes Francesco Pesole, FX strategist at ING.

Bullish momentum EUR/USD solid and stable

“The question is whether the European Central Bank will react with faster easing due to slow growth. The answer to that depends on inflation and wage dynamics, which have so far argued against the doves.”

“Today’s ECB Negotiated Wage Indicator is a key release; the risk is to see another disappointing print for the ECB after German wages were higher than expected. The first quarter print was 4.7% quarter-on-quarter, and while the headline number may be down, this may be due to one-off factors, and a closer look at the report could show the kind of underlying wage resistance that worries the ECB. .”

“We’ve seen solid and stable EUR/USD momentum and given the risks of a brutal re-evaluation in ECB rate expectations (at -70bp by the end of the year, they’re still quite dovish), we retain a positive bias on the pair. The short-term fair value level has increased to around 1.13 in our calculations, so there is no strong technical impairment for another larger segment in our view.”