On Tuesday, ING analysts provided insights into the EUR/USD exchange rate, suggesting that 1.08 is perceived as a fair value over the medium term. The currency pair experienced an upswing following the release of US jobs data on Friday, which was softer than anticipated.
Still, analysts highlighted that a significant shift in US unemployment figures would be required to influence the Federal Reserve's approach and consequently affect the dollar's trajectory.
The upcoming release of the US Consumer Price Index (CPI) data for April is expected to be a key determinant for global foreign exchange rates. The report, due next week, could potentially incite the next major movement for the dollar.
In the meantime, the eurozone's economic calendar remains relatively uneventful, and the European Central Bank's (ECB) anticipated easing cycle for 2024, involving a 75 basis point reduction, is believed to be already factored into current pricing.
ING's Global Head of Markets and Regional, Chris Turner, stated that a trading range between 1.07 and 1.08 is likely for EUR/USD throughout the week, based on the medium-term valuation. He added that this aligns with their previous assessments of the currency pair's fair value.
Moreover, European currencies face potential downside risks from the Riksbank's policy meeting set for tomorrow. Despite apprehensions regarding a weaker currency, the Riksbank is expected to proceed with a rate cut.
Drawing parallels to the Swiss National Bank's rate reduction in March, such policy decisions from European central banks could contribute to a divergence theme and result in European currencies underperforming. This forthcoming meeting is flagged as an event risk that could impact currency markets.
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