EUR: Lagarde provides support – ING

We were caught off guard by the main message from ECB President Christine Lagarde yesterday that the easing cycle was nearing its conclusion, ING's FX analyst Chris Turner notes.

1.1330/1350 may be the limit of the EUR/USD sell-off

"The terminal rate for the ECB easing cycle was subsequently priced 11bp higher, with 1m EUR ESTR priced one year forward now at 1.71%. This compares to the extreme of 1.40% in mid-April. The market still prices a further 25bp ECB cut later this year, but this has now been pushed back to October from September. ECB confidence in the modest growth cycle into 2026 and 2027 is a modest euro-positive."

EUR/USD came close to 1.1500 on those Lagarde remarks yesterday. As above, we're going to need quite a soft set of US data today to break that 1.1500 barrier above which the April 1.1575 high comes into play. We suspect 1.1330/1350 may be the limit of the EUR/USD sell-off should US data not be as weak as the market is positioned for.