The short-term rates picture continues to argue for a consolidation in the EUR/USD above 1.11, with some upside potential. If it wasn’t for the eurozone’s soft growth picture, EUR/USD would probably be trading closer to 1.13, but the short-term call is closer to 1.12 for EUR/USD, ING’s FX strategist Francesco Pesole notes.

The Thursday’s stage is set for quite a few ECB speakers

“Once the post-FOMC volatility settles, the short-term rates picture continues to argue for a consolidation in the pair above 1.11, with some upside potential. That was not just reinforced by the Fed’s larger-than-expected cut, but also by an increasingly vocal ECB hawkish front, which is preventing markets from pricing in another cut in the eurozone in October.”

“The EUR:USD 2-year swap spread has continued to shrink, now at -0.85bp. By comparison, that was -160bp in April, and -100bp a month ago. If it wasn’t for the eurozone’s soft growth picture, we would probably be trading closer to 1.13 now, based purely on rate differentials.”