Euro gains against US Dollar capped by rotation into Dollar cash – ING

1.12 is ING’s Chris Turner’s expected consolidation level for EUR/USD, barring a soft US jobs report. Turner sees little strength in the Euro’s recent performance, as the US tech sell-off has failed to lift EUR/USD. In his view, European investors are retaining cash in Dollars, while US Treasuries have resumed their familiar safe-haven correlations. Market pricing for December ECB rate hikes remains sticky.

Euro Fails to Gain From US Tech Sell-Off

"It has been a rather unimpressive performance from the euro. We know that the European buy-side is running low hedge ratios on its US investments. Yet a large US tech sell-off is still not enough to prompt much EUR/USD buying at all."

"It seems that global investors are more than happy to leave their cash in dollars for the time being. In other words, we are seeing a rotation into cash and not out of the dollar. Helping that story is the return to more familiar correlations, where US Treasuries are now performing their safe haven role."

"Barring a soft US jobs report today, expect EUR/USD to consolidate not far from 1.12."

"The market still prices 18bp of ECB hikes in December and that should remain sticky unless we see a much deeper equity correction."

"EUR/GBP has overshot rate differentials down at these low 0.83 levels, but there seems to be no reason to expect an upside correction just yet."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)