ING’s Chris Turner says EUR/USD remains well supported by broad Dollar softness. Expected mild eurozone growth in the August PMIs and elevated inflation expectations keep the case for another European Central Bank (ECB) hike alive. EUR/USD is seen consolidating in the 1.1670-1.1710 range before potentially edging higher, although high natural gas prices remain a risk.

Euro supported by soft Dollar story

“EUR/USD remains well supported, and, as above, we favour the kind of benign decline in the dollar that tends to float all boats. Not that anyone is expecting it, but should some true US fiscal consolidation emerge, the combination of tighter fiscal policy and looser monetary policy would be dollar-negative.”

“Fiscal consolidation seems unlikely though, with Washington wanting to spread its pro-growth mindset to the entire G20 when finance ministers and central bank governors meet later this month.”

“Today’s eurozone data calendar focuses on the August PMIs. For the eurozone as a whole, these are expected to indicate a continued mild expansion and one which supports another European Central Bank hike in September. “

“There will also be focus on the ECB’s Consumer Expectations Survey, where three-year inflation expectations reached 3.0% in March and are expected to remain elevated at 2.8%.”

“EUR/USD can consolidate in a tight 1.1670-1.1710 range today, before potentially edging higher.”

“With emerging market currencies performing well, we prefer a continued gentle rise in EUR/USD. High natural gas prices remain a concern, but since the eurozone economy seems to be coping with these better now, EUR/USD can focus on the soft dollar story.”