The EUR/USD pair showed resilience in the face of the European Central Bank (ECB) event risk, maintaining stability despite ECB President Christine Lagarde not adopting an extremely dovish stance. The euro experienced a slight dip at the end of the trading session, but the currency pair continued to hover around the 1.05 mark.
Analysts from ING observed that the direction for eurozone interest rates is trending downward, with expectations that rates could surpass the neutral threshold of 2.00/2.25%.
The recent widening of the Italian:German sovereign bond spread was seen more as a result of profit-taking and position adjustments rather than a reaction to the ECB’s awareness of the potential eurozone economic slowdown.
The spread had previously been unusually narrow, suggesting the current movement is not indicative of a larger concern about the ECB’s monetary policy direction.
The EUR/USD pair is expected to remain close to the 1.05 level for the day. Market participants are looking ahead to next Wednesday’s Federal Open Market Committee (FOMC) meeting, which is anticipated to be the next significant event influencing the dollar.
Those holding short positions in EUR/USD are predicted to maintain their stance, as it is considered a carry-positive position. The short-term trading range is projected to be between 1.0450 and 1.0550.
In Switzerland, the Swiss National Bank (SNB) opted for a more assertive 50 basis point rate cut. Martin Schlegel, the new President of the SNB, expressed a dislike for negative interest rates but acknowledged the bank’s willingness to implement them if necessary.
Although not fully convinced of a negative rate scenario for the SNB next year, ING maintains that the SNB will likely not cut rates as deeply as the ECB, predicting a downward trend for the EUR/CHF pair.
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