ING is out with a quick note on the EURUSD and why they think the pair is set to reach 1.20 by year-end.
Fed outlook: Expects three consecutive 25bp cuts (Sept, Oct, Dec 2025), with more easing in 2026, bringing the Fed’s terminal rate down to 3.25%.
Jobs & inflation: US labor market deterioration (payroll revisions, weaker sentiment) undermines the dollar’s last support; tariff-driven inflation seen as short-lived.
USD pressure: Cheaper hedging costs from Fed cuts should trigger more USD selling, alongside seasonal weakness and the risk of a new Fed chair in 2026.
Investor flows: Foreign demand for eurozone assets remains strong, with €236bn of purchases in May–June alone.
Eurozone story: Fiscal expansion in Germany could deliver 2% growth through 2026, adding euro support and possibly leading the ECB to tighten ahead of the Fed.
Forecast: Sees EUR/USD climbing toward 1.20 by year-end 2025 and 1.22–1.25 by late 2026.
Risks:
US inflation proves sticky, limiting Fed cuts.
US jobs market shows resilience.
Geopolitical shocks (collapse of peace talks, military escalation).
US tariffs on the EU dampen sentiment.
European politics (French fiscal risks, bond market pressure).
The pair is currently just over 3 big figures away from 1.20. That's also close to the double-top highs the pair got to back in 2021.
