Tuesday witnessed strategists at ING discussing the current foreign exchange trends, highlighting potential impacts on the US dollar and the euro. They noted that if the People's Bank of China (PBoC) begins to set higher USD/CNY fixings, this could strengthen the dollar globally.
The strategists pointed out the difficulty in opposing the prevailing strong dollar trend, with the possibility of the US Dollar Index (DXY) finding support at 106.00, potentially moving towards 107.
Regarding the euro, ING strategists emphasized that policy divergence continues to be a key narrative, especially against the backdrop of global equities facing headwinds. This situation allows the EUR/USD exchange rate to align more closely with yield differentials, which have been most favorable for the dollar since the end of 2022.
With a relatively light eurozone economic calendar for the day, except for a few European Central Bank (ECB) speakers and the ZEW investor expectations survey, the strategists foresee a potential decline in the EUR/USD, targeting 1.0500 in the upcoming week.
The British pound experienced volatility in response to the latest employment and wage data. ING strategists suggest that the significant 12% annualized month-on-month increase in private sector pay is more pivotal for the Bank of England's (BoE) rate decision process than the decline in employment figures. The current wage growth data does not align with the conditions the BoE requires to consider a rate cut.
Strategists at ING have provided their insights without suggesting any actions for investors or predicting long-term market trends. Their analysis remains focused on the current market conditions and the immediate implications of central bank policies and economic data releases on currency exchange rates.
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