European currencies in general are enjoying good momentum, with the Swiss franc and the Swedish krona on top of this week’s G10 scorecard, ING’s FX analyst Francesco Pesole notes.
The next key level is 1.150
“This is a testament to markets looking both for USD alternatives (CHF) and possibly playing some optimistic views on a Ukraine-Russia peace deal (SEK, NOK). The euro can draw benefits from both of these storylines, while the franc is at risk of a positioning-exacerbated correction should a truce in Ukraine be reached.”
“On the domestic side, there is still very little driving the euro for now. We have a few European Central Bank speakers to watch, including Chief Economist Philip Lane, but the Governing Council’s stance has been rather lenient towards market pricing of late, and markets should keep cementing expectations for two cuts this year, leaving little room for EUR short-term swap rate mobility.”
“We think some USD-positive headlines on trade coming from the G7 summit in Canada can put a lid on EUR/USD before the end of the week. The next key level is 1.150, but markets may want to back such a level with softer US data and perhaps a more optimistic story on Russia-Ukraine. For now, it seems a bit premature, and we prefer 1.130 as a near-term target.”