EUR/USD: Get Ready For Its 'First One-Off Discrete Jump' To 1.15 – ING

ING FX Strategy Research argues that the dissolution of the French election risk will allow market participants to fully focus on the next key theme in FX markets the ECB QE tapering.

Such a backdrop, according to ING, should be EUR positive and lead to ‘the first one-off discrete jump’ from its current levels to the 1.15 level by September.  

“As was the case during the US taper tantrum in 2013, we expect long dated EZ yields to increase meaningfully in response to the market anticipating a lower pace of ECB purchases, in turn directly benefiting EUR (similar to the 2Q15 period when Bunds sold off and EUR/USD rallied),” ING argues.

As such, ING expects EUR/USD to stabilize around the 1.15 ‘gravity line’ in Q3 and throughout the end of this year but warns of some episodes of undershoots especially around the end of this year, when market participants start becoming concerned with Italian election risk.

Looking further, ING expects the second discrete jump in EUR/USD to 1.20 around mid-2018 when the second leg of the ECB monetary policy normalization kicks in.

EUR/USD is trading circa 1.0880 as of writing. 

Source: ING Global Markets Research

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