Policy divergence between the Federal Reserve and the European Central Bank (ECB) continues to argue in favour of USD strength. In the opinion of economists at ING, EUR/USD could test 1.07 soon as the French election run-off draws closer and the situation in Ukraine remains highly volatile
Downside risks persist
“The Fed-ECB gap, which is a major determinant of EUR/USD moves, is set to remain wide for longer. We’ll hear from President Christine Lagarde this week, but we doubt she will make any significant U-turn on the policy rhetoric.”
“The second round of the French elections (24 April) draws nearer. Latest polls seem to suggest a relatively safe lead for President Emmanuel Macron over rival Marine Le Pen, but we suspect appetite for the EUR will remain low into this weekend’s vote.”
“There is growing concern about developments in Ukraine after missiles hit the city of Lviv, which had been considered a relatively safe area – partly due to its proximity to the Polish border.”
“A combination of these factors continues to argue against a recovery in the euro, and EUR/USD may test 1.07 in the coming days.”