The pair showed resilience in the face of the risk of an event at the European Central Bank (ECB), maintaining stability despite ECB President Christine Lagarde not taking an extremely dovish stance. The euro saw a slight dip at the end of the trading session, but the currency pair continued to hover around 1.05.
ING analysts noted that eurozone interest rates are on a downward trend, with expectations that rates could breach the neutral threshold of 2.00/2.25%.
The recent widening of the spread between Italian and German government bonds was seen as a result of profit-taking and position adjustments rather than a response to the ECB’s awareness of the possible economic slowdown in the eurozone.
The gap was previously unusually narrow, suggesting that the current move is not indicative of greater concern about the stance of the ECB’s monetary policy.
The EUR/USD pair is expected to remain close to the 1.05 level throughout the day. Market participants are looking forward to next Wednesday’s Federal Open Market Committee (FOMC) meeting, which is expected to be the next major event to impact the dollar.
It is predicted that those holding short positions in EUR/USD will maintain their position as this is considered a carry positive position. The short-term trading margin is expected to be between 1.0450 and 1.0550.
In Switzerland, the Swiss National Bank (SNB) has opted for a more assertive interest rate cut of 50 basis points. Martin Schlegel, the new president of the SNB, expressed his distaste for negative interest rates but acknowledged the bank’s willingness to introduce them if necessary.
Although ING is not yet fully convinced of a negative interest rate scenario for the SNB next year, it maintains that the SNB is unlikely to cut rates as deeply as the ECB and predicts a downward trend for the pair.
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