EUR Outlook: ING Eyes Push Toward 1.130 as ECB Cut Expectations Hold

EUR Outlook: Eyeing 1.130, but above 1.12 – ING

The Euro (EUR) has remained relatively stable above the 1.12 level this week despite mixed economic data and strong expectations for rate cuts from the European Central Bank (ECB). According to ING's FX analyst Francesco Pesole, the bias is leaning towards testing the 1.130 level, with the market and consensus aligning on two ECB rate cuts this year, which is also ING's expectation.

This week, revised first-quarter GDP data showed slightly weaker growth than expected, downgraded from 0.4% to 0.3%. However, March industrial production was better than expected, providing support for the single currency.

"Market consensus is unified in expecting ECB rate cuts this year, and that aligns with our outlook," Pesole noted. "ECB officials have not provided significant pushback on this view."

Mixed signals from ECB officials, including dovish ones like Martins Kazaks from Latvia, who indicated that a rate cut in June is "a pretty possible step," as well as more hawkish figures like Klaas Knot and François Villeroy, suggest that fears of U.S. tariffs fueling Eurozone inflation have not materialized, leaving room for further rate cuts.

As the market remains optimistic about the U.S.-China trade deal, ING expects the Euro to stay stable, potentially moving towards 1.130.