EUR/USD came under bearish pressure on Tuesday and touched its lowest level in three months near 1.0700. Economists at ING analyze the pair’s outlook. 

Wider rate differentials and softer equities weigh

Tuesday's US CPI data briefly pushed EUR/USD two-year swap rate differentials back to the widest levels of 2023. Add in a sell-off in equities and it was understandable that EUR/USD came under pressure.

EUR/USD continues to unwind the late 2023 rally and a break under 1.0700/0710 opens up 1.0660 and possibly even 1.0610. However, with Fed easing expectations moving back to more conservative pricing (and nearer to the Fed's own expectations of 75 bps of easing this year) we suspect the 1.0600/1.0700 levels may be a good area for corporates to hedge long Dollar or short Euro exposure.