The EUR/USD pair briefly surpassed the 1.10 mark following the Federal Reserve’s significant easing measures. However, ING’s FX strategist Francesco Pesole warns of a potential dollar rebound in the near term.
EUR/USD Expected to Remain Above 1.10
Despite the recent surge, Pesole predicts that the EUR/USD pair could retreat back to the 1.090 level as the dollar regains strength. The current 2-year EUR/USD swap rate differential stands at -100bp, indicating high volatility but also reflecting a narrowing trend since April.
According to short-term models, EUR/USD is likely to continue trading above 1.10 even if the spread widens by another 20bp in favor of the dollar.
Looking at other European currencies, the Norwegian Krone (NOK) is expected to outperform following a recent equity market downturn. On the other hand, the Swedish Krona (SEK) may lag behind due to lower risk sentiment and speculation of a rate cut by the Riksbank in August.
Analysis:
The recent movements in the EUR/USD pair can have a significant impact on forex traders and investors. As the dollar potentially strengthens, traders should closely monitor the spread between the euro and the dollar. Additionally, keeping an eye on other European currencies like the NOK and SEK can provide valuable insights into market trends and potential opportunities for profit.