ING: The EUR - FJElite
EUR/USD is trading around 0.5% below our estimate of short term fair value. As discussed above, global equities currently carry the highest beta in our model and, when combined with supportive rate differentials, are offsetting the negative impact of higher oil prices.
We don’t expect the Governing Council to push back against a largely expected hike this summer. However, market expectations have grown more hawkish in the past week due to higher oil prices, increasing the risk that this hawkish bar may not be met by a still relatively cautious ECB.
Still, a material dovish surprise is needed to bring EUR/USD sustainably below 1.170 unless relative nntimkm nrnunrl n rpmlutinn in thp fîulf fndpç