EUR/USD Rejected at 1.1000: Anticipating Rangebound Trading and Assessing ECB Dovish Bets

EUR: Rejected at 1.1000

EUR: Rejected at 1.1000

Yesterday, EUR/USD was rejected at the 1.1000 key resistance level, and in line with our dollar view, we now expect some more days of rangebound trading, with some modest downside risks for EUR/USD.

One factor that we wish to keep highlighting, though, is the rather wide potential for the euro to benefit from an unwinding of ECB dovish bets in the coming months. Markets continue to price in 140bp of easing by year-end, while our economics team only forecasts 75bp. We expect to see those benefits to the euro more clearly in pairs such as EUR/CHF in the short term rather than in EUR/USD, at least until a clearer dollar downtrend emerges (in our view, a 2Q story).

Other than some final December CPI reads in France and Spain (which shouldn’t move the market), the eurozone calendar is empty today. The next key data input for the euro is the German ZEW on Tuesday. We’ll keep monitoring ECB speakers to make sense of what is the “consensus” degree of rate-cut pushback the bank wants to convey to markets. Today, we’ll hear from Chief Economist Philip Lane.

Elsewhere in Europe, Sweden’s Riksbank releases FX sales figures for the week around Christmas today: expect a low number, or even zero, due to low liquidity conditions. In a piece we published this week, we discuss how we expect the end of Riksbank FX sales by early February, hurting SEK in the crosse

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Topics

EUR/CHF eur/usd currency pairs sek france sweden Swedish Krona spain market conditions ECB speakers rejection consensus short-term downside risks easing eurozone calendar key resistance monitoring rangebound trading dollar downtrend data input negative impact rate cut pushback February Riksbank FX sales and why is it anticipated to be a low number? When do the authors expect the end of Riksbank FX sales dollar view ECB dovish bets economics team forecast euro benefits unwinding 2Q story December CPI reads German ZEW market scenario anticipated low liquidity conditions Chief Economist Philip Lane Riksbank FX sales figures week around Christmas potential catalyst What key resistance level did EUR/USD face rejection at and what is the anticipated market scenario for EUR/USD following the rejection at 1.1000 < What is highlighted as a factor with wide potential for the euro in the coming months How much easing do markets currently price in by year-end for the ECB and what is the forecast by the economics team In which currency pairs do the authors expect to see clearer benefits for the euro from the unwinding of ECB dovish bets What is mentioned as a potential catalyst for the euro in the short term What upcoming data input for the euro is mentioned in the article What is the significance of the German ZEW mentioned in the article What is expected from Sweden’s Riksbank in terms of FX sales figures and why is it anticipated to be a low number When do the authors expect the end of Riksbank FX sales and how might it impact the Swedish Krona (SEK)What is the suggested reason for a potential low or zero FX sales figure What is the timeline mentioned for the potential negative impact on SEK due to the end of Riksbank FX sales Which ECB speaker will be delivering remarks in the article and what role does this individual play What type of trading conditions does the article attribute to the expected FX sales figures from Riksbank

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