ING’s Francesco Pesole notes that EUR/USD may have bottomed last week if markets maintain a constructive view on further geopolitical de-escalation. He argues a sustained move above 1.15 still requires dovish Federal Reserve (Fed) repricing and stabilised risk sentiment. With a light eurozone calendar, EUR/USD is expected to react mainly to the Federal Open Market Committee (FOMC), potentially returning to the 1.1400–1.1450 range in coming days.

Euro outlook tied to Fed repricing

"The resumption of military strikes overnight is a reminder that caution remains warranted on EUR/USD. Even so, if markets are right to maintain a broadly constructive view on further de-escalation, there is a good chance the pair bottomed out last week. "

"For a sustainable move back above 1.15, two pieces are still missing: dovish Fed repricing, either through US data or communication, and a stabilisation in risk sentiment."

"While tech stocks’ independence from rates helped support EUR/USD during the spring, the current turmoil in the chip sector may now cap gains despite improving Middle East headlines."

"With little on today’s eurozone calendar, EUR/USD should take its cue from the FOMC. As a baseline reaction to a modest dovish Fed surprise, we look for a move back into the 1.1400-1.1450 range over the coming days."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)