EUR/USD traded on the soft side on Tuesday. Economists at ING analyze the pair’s outlook.

Eyes on the doves

The pair may struggle to find clear direction before key US data are released later this week. Even then, our perception is that – barring major data surprises – the uncertainty surrounding a second hike by the Fed after July and the ECB's hawkish message (which has offset weak Eurozone data) can keep EUR/USD in a 1.08-1.10 range for longer.

The focus will be on ECB speakers: Joachim Nagel (who recently stuck to his hawkish rhetoric), plus some more dovish members (Ignazio Visco, Francois Villeroy de Galhau and Pablo Hernandez de Cos). Markets are pricing in 38 bps of tightening by September and an alarming tone on core inflation from the doves might help markets fully price in that move.