As we had anticipated, EUR/USD was looking a bit too expensive close to 1.145, and the bounce below 1.140 is probably due to some short-squeezing, ING's FX analyst Francesco Pesole notes.
EUR/USD can settle back close to 1.13 over the coming weeks
"Some potential positive news on US-China trade tensions this week argues against a quick return to early Tuesday levels (1.1420+). That is, barring some materially soft US data today."
"Yesterday’s eurozone inflation figures incidentally increased the chance of a more dovish message by the ECB. Aside from the print below the 2.0% target in headline inflation, core decelerated quite abruptly, from 2.7% to 2.3%."
"The overall ECB message should be dovish, but that more references to the euro’s global potential can offset the negatives for EUR/USD. US and EU trade negotiators are meeting in Paris. Our view on EUR/USD is unchanged: we think the pair can settle back close to 1.13 over the coming weeks, and that short-term rallies may still lose steam as they approach 1.150."
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