Domestic news and overall environment continue to point to weakness – ING

EUR/USD is enjoying a relief rally to 1.0600. Economists at ING analyze the pair’s outlook.

EUR/USD downside risks could extend to the 1.00/1.02 area

Domestic news and the overall environment continue to point to EUR/USD weakness, and our rates team sees more upside risks for back-end UST yields, which could pave the way for a further short-term depreciation in EUR/USD.

Should we see a material deterioration in the Italian bond market – and barring a swift reaction by the ECB to calm investors – EUR/USD downside risks would extend to the 1.00/1.02 area in an environment where US bonds remain under pressure on the back of solid US data and the Federal Reserve remains hawkish.