EUR/USD to hold around 1.11 today, but sizeable downside risks in coming weeks – ING

EUR/USD rallied by more than 1% on Tuesday. In the view of economists at ING, German CPI is set to help euro hold on to gains.

Rate differentials and other fundamentals point to a weakening in the pair

“Geopolitical risk now appears almost fully priced out, while rate differentials and other fundamentals point to a weakening in the pair.”

“The euro might get some support today from the March inflation readings in Germany and France. German inflation looks set to have broken above 6.0%, once again driven by higher energy prices, which should keep alive the market’s expectations on ECB tightening in 2022.” 

“We think EUR/USD can hold around 1.11 today, but we continue to see sizeable downside risks in the coming weeks.”