EUR/USD: ECB dovish repricing not necessarily a damper – ING

EUR/USD has returned to 1.09. Economists at ING analyze the pair’s outlook.

Adverse short-term rate spread

Markets are now pricing in a first ECB cut in April, and further dovish repricing will become harder from this point on. However, that won’t be necessary to put pressure on EUR/USD if short-term differentials reconnect with the pair. 

The 2-year EUR-USD swap spread is now at 178 bps the lowest since December 2022, when EUR/USD was at 1.05.

See: The coming monetary policy phase should be rather favorable for EUR – Commerzbank