After a grim couple of months for eurozone data, the interest rate market now prices the European Central Bank's deposit rate being cut to 2.00% next summer, ING’s FX analyst Chris Turner notes.

EUR/USD can hold support in the 1.0850/1.0900 area

“If anything, there is a slight risk that the ECB under-delivers on the easing cycle, and we do not expect the two-year EUR:USD swap differential to widen much further from here; we would not chase EUR/USD sub 1.0900 from this point unless, for instance, we saw a sharp spike in oil prices.”

“In the bigger picture, we see EUR/USD trading just above the middle of a 1.0550-1.1150 two-year trading range. November and especially December are typically more bearish months for the dollar, but the outcome of the US presidential election on 5 November will set the tone.”

“For the time being, we suspect EUR/USD can hold support in the 1.0850/1.0900 area and could get a lift if Thursday's ECB meeting isn't quite as dovish as the market is now pricing.”