The EUR/USD pair showed bullish momentum on Tuesday, as short-dated EUR swap rates declined. The stronger euro poses a risk to the ECB's inflation targets, prompting concerns among policymakers. A failure to break below 1.1910/20 could maintain bullish momentum, with potential targets extending to 1.23/24, ING analysts Chris Turner notes.

Stronger euro raises inflation concerns

"Failure of EUR/USD to break back under 1.1910/20 now keeps bullish momentum intact. In fact, it now looks like Monday's gap higher could be a very bullish 'breakaway gap', which could see the move extend all the way to 1.23/24, as unlikely as that seems."

"One of the threats to the neutral ECB policy outlook has been the stronger euro. And yesterday's EUR/USD price action suggests the doves at the ECB might be right to worry that a stronger euro could see the ECB missing its inflation target to the downside."

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