EUR/USD: Limited correction to 1.0560/70, with outside risk to 1.0650 – ING

Having briefly dipped under 1.05 yesterday, EUR/USD has regained a little composure today. For today, the focus will be on European April CPI, where economists at ING see upside risks. Regarding the EUR/USD pair, they expect some consolidation.

Upside risks to April CPI

“We see upside risks to today's April eurozone CPI release, where consensus sits at 7.5% YoY for the headline reading and 3.2% for the core. An above consensus figure will no doubt draw out the ECB hawks. However, the eurozone money market already prices in 87bp of tightening this year – pricing which has done little to help the euro.” 

“There is a case to be made that in the event of an abrupt shut-off in European gas, the ECB will struggle to deliver more than a 50bp rate hike – effectively normalising the deposit rate to zero.

“The international environment (stronger Asia) favours some consolidation in EUR/USD short-term. That could mean a limited correction to 1.0560/70, with outside risk to 1.0650.”

See – Eurozone HCPI Preview: Forecasts from six major banks, not peaking yet