EUR/USD has taken off on the back of US disinflationary bets and a large unwinding of Dollar positions. Economists at ING analyze the pair’s outlook.

Rally looking a bit stretched

It seems difficult to build a strong counterargument to the bearish USD narrative at this stage and while some correction after a large and possibly overstretched move is possible, the near-term outlook may stay broadly bullish on EUR/USD.

EUR/USD may stabilise around 1.1200 today, or even correct lower back to the 1.1170-80 area in the currently highly volatile environment.