ING analyst Francesco Pesole says EUR/USD is receiving support from a
re-narrowing of the US–euro area short-term interest rate differential amid
renewed US–Iran tensions. Softer market bets on ECB tightening have left scope
for euro-area short-end rates to firm, underpinning the euro. However, a
sustained rise in oil/energy prices could limit that upside. Given recent ECB
policymaker caution and the adverse terms-of-trade impact from higher energy
costs, markets are unlikely to price in more than two ECB hikes by year-end.
