EUR/USD holds below 1.1473 despite 1% rebound – DBS

EUR/USD rebounded 1% overnight but remains below last Friday’s 1.1473 high. The ECB is expected to cut rates by 25bps to 2.25%, and President Lagarde is expected to flag euro strength and US tariffs as key disinflationary risks, DBS' FX strategist Philip Wee notes.

Lagarde likely to flag EUR strength as disinflationary risk

"Looking beyond its 1% rebound overnight, EUR/USD is still within its three-day range between 1.1260 and 1.1430, and below last Friday’s intra-day high of 1.1473."

"Apart from the European Central Bank cutting its deposit facility rate by 25 bps to 2.25% today, we expect some concern from ECB President Christine Lagarde regarding the EUR’s recent appreciation as a factor holding inflation down and adding to the headwinds posed by US tariffs."

"The accompanying ECB Survey of Professional Forecasters should also reflect downgraded growth expectations, affirming that the defence and infrastructure spending under the 'ReArm Europe' Plan would not offset the immediate headwinds due to the negative impact of US tariffs."