EUR: 'Atlantic spread' moves wider still – ING

The 'Atlantic' spread as some traders call it has widened even further, ING’s FX analyst Chris Turner notes.

EUR/USD looks ready to test 1.0600

“Two-year EUR:USD swap differentials have now widened beyond 180bp in favour of the dollar. We haven't seen this kind of level since 2022, when EUR/USD was trading close to parity. Admittedly those parity levels in 2022 were partly caused by the surge in energy prices and the terms of trade impact on the euro – a negative factor that is not present today.”

“EUR/USD looks ready to test 1.0600, below which our end-year target at 1.05 beckons. As above, one month implied EUR/USD volatility is being brought back up towards 8% having been offered near 6.50% last week.”

“The only events of note on the European calendar today are ECB speakers (Olli Rehn and Robert Holzmann), who will probably not stand in the way of an ECB rate cut in December. The question is, will it be 25bp or 50bp? The market prices 30bp. Our eurozone team think it will be 50bp.”