To rise above 1.12 in the short term – ING

The short-term rates picture continues to support a EUR/USD consolidation above 1.11 with some upside potential. Were it not for the weak eurozone growth picture, EUR/USD would likely trade closer to 1.13, but the short-term call is closer to 1.12 for EUR/USD, notes ING FX strategist Francesco Pesos.

Thursday’s stage is set for several ECB speakers

“Once post-FOMC volatility settles in, the short-term rate picture continues to argue for a consolidation of the pair above 1.11 with some upside potential. This was not only reinforced by the Fed’s bigger-than-expected tapering, but also by an increasingly vocal ECB front, which prevents markets from settling for another eurozone tapering in October.

“The 2-year EUR:USD exchange rate continued to narrow, now at -0.85bp. By comparison, it was -160bp in April and -100bp a month ago. If it weren’t for the picture of soft eurozone growth, we’d probably be trading closer to 1.13 right now based solely on rate differentials.”

“Today, the euro zone calendar does not include market movement data, but quite a few ECB speakers. We will hear from one of the pigeons, Panetta, but also from the hawks Knot and Schnabel. Ultimately, louder hawks should keep markets reluctant to price in more ECB easing, despite the Fed’s accommodative influence.”