Euro: Range-bound before FOMC against US Dollar – ING

The immediate implication for EUR/USD is neutral to mildly bearish, with volatility likely compressed before the FOMC minutes. ING’s cited 1.1520–1.1580 near-term range reflects a market lacking a fresh catalyst strong enough to extend the euro’s rally above 1.16.

The main cross-current is energy. Elevated natural-gas prices increase euro-area inflation risks and strengthen expectations for an ECB rate hike in September, which is supportive for the euro through wider or less-negative expected euro-area interest-rate differentials. However, persistently high energy costs also threaten household demand, industrial competitiveness, and growth—limiting the bullish currency effect if markets begin treating the shock as stagflationary rather than purely inflationary.

For the dollar, the FOMC minutes are the key short-term risk. A more hawkish discussion—particularly concern that energy-driven inflation could delay easing or require another hike—could lift US yields and the dollar, pushing EUR/USD toward the lower end of the indicated range. Conversely, evidence that policymakers remain comfortable with no further tightening would reinforce ING’s medium-term euro-positive view and could allow the pair to challenge the recent 1.16 area again.

ING’s projections of 1.17 by end-September and 1.18 by year-end therefore represent a conditional medium-term bullish scenario, dependent largely on the Fed not hiking and on euro-area economic surprises remaining favorable. The risk is that these forecasts are already reflected in positioning: disappointing euro-area growth, falling gas prices that reduce ECB-hike expectations, or a hawkish repricing of the Fed path could produce a sharper EUR/USD correction.

Traders should monitor the FOMC minutes, US Treasury yields and rate expectations, European natural-gas prices, ECB pricing for September, and whether EUR/USD can sustain levels above 1.16 after the event. The setup is best characterized as short-term range-bound with event-driven two-way risk, but a modest medium-term euro upside bias if Fed easing expectations remain intact.