ING warns elevated European gas prices and geopolitical tensions may limit the euro’s recovery despite lower oil prices.
EUR/USD climbed above 1.1400 as oil prices fell, but ING cautions the rebound lacks sustainability without geopolitical de-escalation. Renewed military strikes could push Brent back to $100 and the pair below 1.1380.
European gas prices remain a key risk, with TTF trading at €58/MWh—30% above early July levels and near March highs. Elevated gas costs hurt the euro’s terms of trade, a critical medium-term driver of its valuation, keeping pressure on the currency.
Upcoming Eurozone CPI data may show headline inflation above 3.0%, but core inflation near 2.5% is unlikely to trigger aggressive ECB hawkishness. Markets price 42 basis points of ECB cuts, while Fed policy and USD safe-haven demand could further weigh on the pair.