ING is out with a quick note on the EURUSD and why they think the pair is set to reach 1.20 by year-end.
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Fed outlook: Expects three consecutive 25bp cuts (Sept, Oct, Dec 2025), with more easing in 2026, bringing the Fed’s terminal rate down to 3.25%.
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Jobs & inflation: US labor market deterioration (payroll revisions, weaker sentiment) undermines the dollar’s last support; tariff-driven inflation seen as short-lived.
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USD pressure: Cheaper hedging costs from Fed cuts should trigger more USD selling, alongside seasonal weakness and the risk of a new Fed chair in 2026.
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Investor flows: Foreign demand for eurozone assets remains strong, with €236bn of purchases in May–June alone.
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Eurozone story: Fiscal expansion in Germany could deliver 2% growth through 2026, adding euro support and possibly leading the ECB to tighten ahead of the Fed.
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Forecast: Sees EUR/USD climbing toward 1.20 by year-end 2025 and 1.22–1.25 by late 2026.
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Risks:
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US inflation proves sticky, limiting Fed cuts.
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US jobs market shows resilience.
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Geopolitical shocks (collapse of peace talks, military escalation).
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US tariffs on the EU dampen sentiment.
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European politics (French fiscal risks, bond market pressure).
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The pair is currently just over 3 big figures away from 1.20. That’s also close to the double-top highs the pair got to back in 2021.
This article was written by Arno V Venter at investinglive.com.
