Euro: 1.150 target nears on Fed risk against US Dollar – ING

EUR/USD impact: cautiously bullish, but highly event-dependent.

This is primarily a policy-expectations trade, not a new fundamental shock. ING’s view implies that the Federal Reserve decision could weaken the dollar enough to move EUR/USD toward 1.1500, particularly if the Fed signals less restrictive policy or markets price a deeper decline in US front-end yields. That would reduce the dollar’s yield advantage and support euro-dollar upside.

The bullish case is strengthened by the expectation that both the Fed and ECB may remain on hold, allowing synchronized easing in short-term rate expectations. If US rates fall faster than euro-area rates, EUR/USD could extend higher; lower US funding costs could also improve broader risk appetite and reduce demand for the dollar as a defensive asset.

However, ING does not present 1.1500 as an unqualified breakout target. Below that area, the report expects risks to become more balanced because short-term valuation and rate differentials may limit further euro losses. This suggests potential two-way volatility rather than a clean trend continuation once the pair approaches the level.

The main bearish risks for EUR/USD are a hawkish Fed outcome, higher US yields, renewed demand for dollar liquidity, or continued energy-price strength. The latter could support the dollar through inflation and safe-haven channels while damaging Europe’s external terms of trade. Euro-specific political risk—particularly concerns around France’s budget—could also cap euro gains.

Trader focus:

the key confirmation will be the Fed’s guidance relative to market pricing, followed by the reaction in US two-year yields and the dollar index. A dovish repricing that is larger in the US than in Europe would support EUR/USD; a broadly dovish repricing across both curves may instead create a floor without producing sustained upside. Energy prices, French fiscal developments, and subsequent Fed/ECB communication remain important for determining whether 1.1500 acts as a target or a resistance zone.