EUR/USD marches towards 1.0200. A break above this level is on the cards, economists at ING report.

Equity differential on the driver's seat

“The market’s growing optimism on Europe is fuelling a rebound in European equities, and the euro’s parallel recovery is keeping that FX-stocks correlation very well alive.”

“The current swap rate differential does surely point at a stronger EUR/USD, but in order for the pair to reconnect with that differential under current market conditions, we’ll likely need a period of stabilisation in European sentiment, something we are seeing now but may prove hardly sustainable in the coming weeks.”

“Another potential good day for risk assets if US CPI moves lower may keep EUR/USD bid for now: a break above 1.0200 is possible at this stage, but a return to the 1.0000 level parity remains our base-case scenario into year-end for EUR/USD.”