Euro: Headwinds from Fed and energy – ING

ING’s Chris Turner highlights growing headwinds for the Euro as higher energy prices and a more hawkish Federal Reserve push EUR/USD lower. He sees scope for a move toward 1.15 by month-end, notes rising ECB tightening expectations that his team deems unlikely, and flags EUR/CHF and USD/CHF dynamics driven by oil prices and credible Fed policy.

Euro pressured by Fed and energy

"Higher energy prices and, in particular, a more hawkish Fed have seen EUR/USD swing lower in recent ranges."

"Below 1.1565/70, EUR/USD can extend its drop to the 1.1520 area and we think something like 1.15 looks an appropriate target for month-end."

"Higher energy prices continue to drag ECB tightening expectations higher, with currently another 80bp of tightening priced by next summer."

"Our team feels that is highly unlikely. Yet, the market will be reluctant to take the other side of that trade until there is more clarity on events in the Middle East."

"Elsewhere, EUR/CHF is trading above 0.94 as higher oil prices drive euro interest rates higher against more anchored Swiss rates."