EUR/USD could drop to the 1.0800/0820 area if US CPI sees the 10Y US-T yields push higher – ING

EUR/USD is languishing below 1.09. Economists at ING believe that the world’s most popular currency pair could extend its slide towards the 1.0820/00 zone if US 10-year Treasury yields lurch higher after US CPI data.

New sanctions in focus

“Barring a surprisingly hawkish ECB meeting on Thursday, EUR/USD should stay soft. Indeed, some argue that with 65bp of ECB hikes now priced in by year-end, it is actually difficult for the ECB to deliver a hawkish surprise.”

“Europe has yet to go so far as to place an embargo on Russian oil, but clearly that is the risk over the coming months. Such action may cost Eurozone growth anywhere between 1% and 3% and add a new layer of bearishness to the euro.”

“For today, look out for another plunge in German ZEW investor expectations – perhaps matching the extreme pessimism seen in March 2020. EUR/USD could drift down to the 1.0800/0820 area today if US CPI sees the US 10 year Treasury yields push higher and the German ZEW is as bad as expected.”

See – US CPI Preview: Forecasts from 12 major banks, another lurch forward