ING FX strategist Francesco Pesole says the euro fell into materially undervalued territory after breaching $1.14. He notes short-term rate differentials have actually moved in the euro's favor, offsetting the negative impact on fair value from equity and oil declines, and that the drop has been driven entirely by dollar strength. Pesole warns buying the euro looks risky now, but says the currency is unlikely to make fresh lows unless short-term rate differentials widen further in favor of the d

ING FX strategist Francesco Pesole says the euro fell into materially undervalued territory after breaching $1.14. He notes short-term rate differentials have actually moved in the euro's favor, offsetting the negative impact on fair value from equity and oil declines, and that the drop has been driven entirely by dollar strength. Pesole warns buying the euro looks risky now, but says the currency is unlikely to make fresh lows unless short-term rate differentials widen further in favor of the dollar. The euro continued lower on Thursday, touching Wednesday's eight-week low of $1.1367. Pesole sees $1.1430–$1.1450 as levels more consistent with current market conditions.