ING’s Chris Turner notes that EUR/USD has been hit tough as the dollar rises, increasing pressure on the European Central Bank to sound hawkish while delivering a 25 basis point hike to 2.25%. Despite the expected ECB support, he predicts EUR/USD will remain under pressure near 1.1500, with the 1.14/1.15 region likely to hold this summer as markets test the Fed’s tightening cycle.

Euro under pressure despite expectations of an ECB rate hike

“EUR/USD took a hit on Friday as the dollar broadly strengthened. This increases pressure on the European Central Bank to sound hawkish on Thursday when it is widely expected to raise its deposit rate by 25 basis points to 2.25%.

“Our call is for the hawkish voice of the ECB to maintain its view that there will be another increase in September, when a new round of forecasts will be available.”

“On the activity front, we have already seen a weak batch of German factory orders data for April today and there is a risk that euro zone manufacturing activity data will now start to deteriorate following the stockpiling/building up earlier this year amid uncertainty over the Gulf conflict.”

“As energy prices begin to move again, expect EUR/USD to remain on offer and 1.1500 to remain under pressure. At this stage, we probably think support in the 1.14/15 region is likely to hold this summer, but will remain under pressure until the market considers the concept of a Fed tightening cycle.”

(This article was created with the assist of an artificial intelligence tool and has been reviewed by an editor.)