EUR: Stable short-term fair value around 1.090 – ING

EUR/USD is trading just below 1.10 after having oscillated in a wide band (1.088-1.104) since the weekend. It’s worth noting that the near-term fair value for EUR/USD has remained quite stable just below 1.090 over the past week, and the pair was in stretched overvaluation territory when it spiked to 1.110, ING’s FX analysts Francesco Pesole notes.

ECB looks increasingly likely to cut next week

"Remember that short-term fair value is highly reliant on the two-year swap rate differential, which is currently around 145bp. As the ECB looks increasingly likely to cut next week while the Fed still hasn’t given any signal to justify the four cuts priced by 2025, there is probably a slightly downside-tilted risk for EUR/USD purely from the rate angle."

"The euro’s high liquidity character continues to shield it from the much bigger volatility that has affected the likes of NOK, SEK and GBP in the past few sessions. The European Union still claims it is ready to discuss tariff-free options with the US, but that will likely take time. In the meantime, the EU is going ahead with a relatively measured retaliation to US tariffs."

"It has been reported that 25% tariffs can hit a wide range of US products, but would still fall well short of the $ amount targeted by the US. If we don’t see a turn to a more aggressive response by the EU, the euro could also benefit, especially in the crosses with EM and G10 high beta currencies."