Euro hedging costs collapse, supporting EUR/USD – ING

Eurozone hedging costs on U.S. assets are falling sharply, reinforcing tailwinds for EUR/USD as the Fed easing cycle approaches. Near term, the pair should stay supported around 1.1630/40 with scope to test 1.1700–1.1730, ING’s FX analyst Chris Turner notes.

ECB’s Lane to speak on global imbalances today

“The cost for eurozone bond investors to FX hedge their US investments is tumbling. Using three-month forwards, the cost to hedge US risk back into the euro has now dropped to 1.82% per annum from 2.45% back in July. That is a big deal for a bond investor trying to pick up, say, an extra 150bp by investing in US markets. These US hedging costs are expected to drop further as the Fed cuts rates. And these dollar sales from the eurozone buy-side should be a key factor driving EUR/USD higher in 2026.”

“For today, the eurozone calendar is light. This afternoon, we have a speech from ECB Chief Economist Philip Lane. The subject is global imbalances. Expect to hear more about the international role of the euro and further strong encouragement for politicians to push through reforms, such that the euro can take advantage of the move to a multipolar world.”

“Back to the short term, and we have a slight bias that EUR/USD trades to 1.1700/1730 and continues to find support in the 1.1630/40 area.”