
ING’s Francesco Pesole reports EUR/USD has broken below its summer lows, trading near 1.1350 as Dollar strength dominates. He sees limited scope for another large break unless the Federal Reserve hikes in October and stays hawkish, in which case EUR/USD could extend losses toward 1.10.
"EUR/USD finally fell below the summer lows yesterday. Spot dropped temporarily to 1.1310-20 before paring some losses, trading at 1.1350 this morning. We flagged yesterday how dovish-leaning remarks by Christine Lagarde were leaving the euro in a more vulnerable position, but this drop in EUR/USD appears entirely dollar-driven."

"We don’t expect another big break lower, as we still think the Fed will hike next only in December. But if US data is hot, the Fed hikes in October and stays hawkish, EUR/USD would be ready for another bearish leap, with risks potentially extending all the way to 1.10."
"Even lower oil prices might not help, as markets may be quicker to price out ECB tightening than the Fed’s."
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