EUR/USD: No reason to fight this bearish trend just yet – ING

EUR/USD dropped to below 1.0500 for the first time since early January. Economists at ING analyze the pair’s outlook.

Some new negatives

We can probably all agree that the dominant trend is a strong Dollar. However, two developments this week warn that the Euro may be due to some independent weakness. Italy pushing the budget boundaries and some European Central Bank officials discussing large rises in Minimum Required Reserves. We think an MRR hike would be a clear Euro negative.

There seems no reason to fight this bearish EUR/USD trend just yet. But for today, keep a look out for German and Spanish inflation – in case it builds momentum for one last ECB hike. If not, expect EUR/USD to continue drifting to the 1.0400/1.0410 area.