EUR/USD Passes ECB Test: ING

The EUR/USD pair showed resilience against the risks associated with the European Central Bank (ECB) and maintained its stability despite ECB President Christine Lagarde not adopting an excessively dovish stance. The euro experienced a slight decline towards the end of the trading session, but the currency pair continued to fluctuate around the 1.05 level.

Analysts from ING observed that the directional trend of interest rates in the Eurozone is downward, with expectations that rates could exceed the neutral threshold of 2.00/2.25%.

Italy: The recent widening of the spread between Italian and German government bonds was seen more as a result of profit-taking and position adjustments rather than a reaction to the ECB's awareness of a potential economic slowdown in the Eurozone. Since the spread had previously been unusually narrow, it is believed that the current movement does not indicate greater concerns about the direction of the ECB's monetary policy.

The EUR/USD pair is expected to remain close to the 1.05 level throughout the day. Market participants are anticipating the Federal Open Market Committee (FOMC) meeting scheduled for next Wednesday, which is expected to be the next significant event affecting the dollar.

It is anticipated that those holding short positions in EUR/USD will maintain their stance as it is deemed a favorable position in terms of carry. The short-term trading range is expected to be between 1.0450 and 1.0550.

In Switzerland, the Swiss National Bank (SNB) made a more decisive 50 basis point rate cut. The new President of the SNB, Martin Schlegel, expressed a dislike for negative interest rates but acknowledged the bank's willingness to implement them if necessary.

While ING is not fully convinced of a negative interest rate scenario for the SNB next year, it forecasts that the SNB will not pursue as deep rate cuts as the ECB and predicts a downward trend for the EUR/CHF pair.