ING’s Francesco Pesole highlights that the European Central Bank’s expanded EUREP repo lines support a more “global Euro” and may signal a more relaxed stance on Euro strength. He expects Germany’s ZEW Expectations index to move above 60.0, potentially helping the Euro, but still sees EUR/USD downside this week with a baseline test of 1.1800 on short-term US Dollar fundamentals.

ZEW improvement but EUR/USD downside bias

"While framed as a financial stability tool, we believe that it represents another step toward a truly “global euro”, expanding its use beyond Europe and strengthening its role in trade, reserves, and international debt markets. It may also hint at a more relaxed ECB stance towards euro strength."

"On the data side, ZEW surveys are out this morning and are expected to show further improvement. The Expectations index should move above 60.0 for the first time since mid-2021, and might offer some support to the euro."

"That said, we remain slightly more in favour of EUR/USD downside for the remainder of the week, given room for USD to recover based on short-term fundamentals. A test of 1.1800 soon remains our baseline."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)