The Euro (EUR) remains around 2% undervalued against the dollar despite Ukraine peace optimism, while weak German Ifo data and delayed fiscal stimulus weigh on sentiment, though analysts still expect EUR/USD to rebound above 1.160, ING's FX analyst Francesco Pesole notes.

German Ifo weakens as business expectations slip

"The Euro is yet to see any real benefit from the Ukraine peace talks, and is trading at a wide 2% undervaluation vs US Dollar (USD) as of this morning, according to our model. That is not specific to the euro, as the dollar’s overvaluation is similar, if not higher, across G10."

"On the data side, we had a look at the German Ifo yesterday. The takeaways weren’t very positive, as German business sentiment deteriorated in November. Expectations weakened despite a slight improvement in current conditions, reflecting fading optimism after earlier fiscal stimulus hopes. Underspending in the 2025 budget suggests stimulus may only kick in next year, which offers some hope for 2026."

"EUR/CHF may prove to be a more preferred way to play Ukraine peace hopes, but EUR/USD undervaluation cannot be dismissed, and a return above 1.160 in the near term remains our baseline."