Anna 
EUR/USD is holding steady around the 1.08 mark, with analysts at ING examining the potential prospects for the currency pair. The focus is on the Federal Reserve’s possible impact on the reconnection of interest rate differentials.
While there is an expectation that the European Central Bank (ECB) will align with the Fed in interest rate cuts, ING economists caution about downside risks for the pair this week. A “coordinated” hawkish recalibration by central banks ahead of Christmas is anticipated, leading to a potential softening of the risk environment. However, the resilience of the risk environment is expected to keep EUR/USD around current levels.
Despite the short-term swap rate differential for EUR/USD reaching its lowest point this year, the analysts believe that the hawkish stances of both the ECB and Fed might not have a significant impact on spreads. The narrowing of spreads, they argue, could technically support a sustained rally in EUR/USD.
In light of these factors, ING suggests that EUR/USD bulls may find satisfaction if the pair maintains support at 1.0700 before Christmas, indicating a potential baseline for short-term stability.
