According to ING’s Chris Turner, the EUR/USD currency pair is consolidating above the 1.1400 level as markets reassess the future policy paths of the European Central Bank (ECB) and the US Federal Reserve (Fed) [1]. The probability of a September rate hike by the ECB has fallen below 50%, reflecting market skepticism about further tightening in the near term [1]. Despite this, Turner notes that it is too early for the ECB to declare victory over inflation, as there remains a risk that core inflation could rise in the coming months [1].
ECB officials, including Isabel Schnabel and Philip Lane, are expected to emphasize ongoing inflation risks in their communications this week [1]. On the US side, the dollar is anticipated to edge higher due to the prevailing Fed narrative, which currently supports the greenback [1]. Turner identifies resistance for EUR/USD at 1.1475, suggesting that the pair is likely to remain offered in the 1.13/1.14 area until there is greater clarity on whether the Fed will need to hike rates again [1].
The analysis implies that EUR/USD topside is capped for now, with market participants awaiting more definitive signals from both central banks before making significant moves [1]. ING’s house view is that this uncertainty may persist until the end of the quarter [1].
CONCLUSION
The EUR/USD is expected to remain range-bound as markets await clearer guidance from the ECB and Fed on future rate moves. With less than a 50% probability priced in for a September ECB hike and ongoing inflation concerns, the dollar may retain a slight edge in the near term. Market participants are likely to remain cautious until central bank intentions become more apparent.