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Dovish Lagarde remarks boost EUR/USD downside risks, ING says

ING points to widened SOFR-ESTR 2-year swap levels beyond 155 basis points, as ECB rate expectations for October cool.

Reported · Written up by our desk · Major Pairs

FX-focused outlet FXStreet, citing a note from ING’s Francesco Pesole, said EUR/USD downside risks have increased after European Central Bank President Christine Lagarde delivered dovish-leaning comments.

According to ING, Lagarde’s remarks helped widen SOFR-ESTR spreads, particularly the SOFR-ESTR 2-year swap moving beyond 155 basis points, with levels now not far from the roughly 163 basis point maximum width seen in early July.

ING also said Lagarde suggested the ECB should adopt a measured response and noted that tight financial conditions are limiting the pass-through of energy costs, while she emphasized there is no evidence of second-round effects.

ING further argued that if there is an October hike, it would more likely be the Federal Reserve rather than the ECB, and said market pricing currently implies 17 basis points for one bank and 9 basis points for the other.

Latest closeEUR/USD 1.137 ▼0.1%

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