The euro has failed to find much lasting support from an increasingly hawkish set of commentary emerging from the European Central Bank (ECB) this week. Economists at ING expect the EUR/USD pair to trade heavily near the 1.08 area.

Decreasing marginal hawkishness

“The problem is that rates lift-off from the ECB this year looks to be overshadowed by aggressive tightening cycles from elsewhere. The core message from the ECB regarding monetary policy of 'optionality, gradualism and flexibility' means that the ECB will not be in the camp of racing to neutral.”

“Let us not forget that the euro OIS market looks to be pricing 95bp of ECB rate hikes this year already – limiting the scope of the euro to react to any further hawkish rhetoric.”

“We favour EUR/USD continuing to trade heavily near the 1.08 area – and any deterioration in the risk environment will generally see the dollar favoured.”