EUR/USD showed some resistance at the 1.0000 level yesterday before falling back down on the dollar’s recovery. Despite the pair having crossed the parity line multiple times recently, that may have increasingly been interpreted as a benchmark level for the broader dollar trend. Considering the reluctance to turn more bullish on the euro into what should be a challenging winter for the eurozone, a sustained recovery to levels above parity in EUR/USD might now only be driven by markets buying more aggressively into the Fed pivot story and/or other drivers offering sustained support to risk assets.
For now, we feel comfortable in reiterating our call for EUR/USD to stay pressured into the 0.90-0.95 in the last months of the year. The new pack of sanctions by the EU likely suggest a prolonged stand-off with Russia, while markets await more details on the proposed oil price cap.
Today’s European Central Bank minutes will be quite interesting for European rates as they might shed some light on the quantitative tightening discussion and the size of the next rate hike. Still, the meeting-by-meeting approach may reduce the informative power of the minutes today.