ING’s Chris Turner notes EUR/USD was hit hard as the Dollar surged, increasing pressure on the European Central Bank to sound hawkish while delivering a 25bp hike to 2.25%. Despite expected ECB support, he anticipates EUR/USD staying under pressure near 1.1500, with the 1.14/1.15 region likely to hold this summer as markets test a Fed tightening cycle.

Euro pressured despite ECB hike expectations

"EUR/USD was hit hard on Friday as the dollar surged across the board. This increases pressure on the European Central Bank to sound hawkish this Thursday when it is widely expected to raise its deposit rate 25bp to 2.25%."

"A hawkish-sounding ECB is our call, and one which will maintain the view that it will hike again in September when it has a new round of forecasts."

"On the activity side, we have already seen a weak batch of German factory orders data for April today, and the risk is that eurozone manufacturing activity data now starts to deteriorate after hoarding/inventory building earlier this year around the uncertainty of the Gulf conflict."

"With energy prices starting to turn bid again, expect EUR/USD to stay offered and 1.1500 to remain under pressure. At this stage, we probably think support in the 1.14/15 region has a chance of holding this summer, but it will remain pressured while the market explores the idea of a Fed tightening cycle."

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