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Analysts at ING points out that it’s summer, it’s quiet, and it’s been pretty wild in global FX markets and the euro is starting to reflect greater short-term domestic political angst.

Key Quotes

 “The link between EUR/USD and peripheral European swap spreads suggests that there may be a hefty 3-4 big figures worth of idiosyncratic European risks (Italy and Turkey) priced into the single currency.”

“We still feel that it may be too early for any of this to be priced out. Investors are still cautious over Turkey’s medium-term economic plan (and we won’t get clarity here until early September), while the next month or so will also see a narrower focus on the risks around Italian budget (also unlikely to be resolved until September/October).”

“Still, with Turkish markets on holiday from Tuesday, the former may be a reduced source of volatility for the EUR in the immediate future. A more stable CNY is also helping the cause following a couple of aggressive PBoC fixings.”

“Eurozone data wise we get the preliminary August PMI release and consumer confidence on Thursday. The EUR bulls will want to see some signs of consumption and investment intentions returning online.”