Markets remain aligned with ECB hawks, who see little room for further interest rate cuts despite cautious voices calling for flexibility, noted Francesco Pisole, currency market analyst at ING.
The EUR/USD pair is expected to stabilize near the 1.170 level
“Despite some scattered calls to retain flexibility by dovish ECB after the December meeting, markets remain aligned with hawks like Isabel Schnabel, who have clearly indicated that further cuts are unlikely in the foreseeable future.”
“EUR/USD remains driven by the dollar leg for the most part. The tough US narrative on Greenland is certainly a border risk to watch. EUR/DKK is an interesting barometer to watch in that sense. It is already trading on the strong side relative to the peg, which would likely need to be defended with heavy intervention if the US moves militarily in Greenland.”
“Barring escalation in this regard, we believe that EUR/USD may stabilize around the 1.170 level in the near term.”
