EUR/USD can trade on the strong side this week on the back of the US events. One-month historical volatility on the pair is now back at the 2024 lows, as the Euro (EUR) has been broadly unresponsive to both soft domestic surveys and the equity and carry trade-driven positioning adjustments in FX. However, if something can shake EUR/USD from this mid-summer low-volatility torpor, that should be the Fed and/or US data, ING’s FX strategist Francesco Pesole notes.

GDP and CPI data comes into focus

“Some tier-one figures in the eurozone are also due this week. The second quarter GDP report tomorrow is expected to show still-tepid 0.5% year-on-year growth, but it will be the flash CPI estimate on Wednesday that should have a greater market impact. The latest European Central Bank meeting has put greater emphasis on data dependence as President Christine Lagarde ditched forward guidance.”

“The expected slowdown from 2.9% to 2.8% in July’s core CPI should not be enough to lead markets to price in more than the 55bp of 2024 easing already in the EUR OIS curve. Incidentally, core inflation has beaten consensus in five of the seven flash estimates since the start of the year.”

“We continue to expect downward corrections in EUR/NOK and EUR/SEK, with the Norwegian currency probably having more room to recover given a stronger rate profile and fundamentals. In Sweden, second quarter GDP surprised on the downside this morning, falling 0.8% quarter-on-quarter and probably keeping pressure on the Riksbank to cut rates despite a weak krona.”