EUR: EU waiting on Trump's trade letter - ING

EUR/USD might have found a short-term anchor at 1.17. Despite the post-NFP hawkish repricing in the USD OIS curve, the two-year swap rate gap remains 15-20bp wider than a month ago. This means that while some USD risk premium remains present at around 1.170, the dollar isn't as screamingly cheap as it was in early June, ING's FX analyst Francesco Pesole notes.

EUR/USD may not drift far from the 1.16-1.18 area

"The eurozone data calendar isn't particularly busy this week, and the focus should be primarily on some ECB speakers. Today, we'll hear from Lane, Guindos and Nagel. Given the return of tariff threats to the EU, the risks are skewed to some slightly more dovish comments in the coming days, although, like markets, the Governing Council may tread very carefully when guessing Trump's ultimate trade plan."

"The US President said yesterday that a letter to the EU outlining the new tariff rate was 'two days off'. We could see the EUR face some pressure on the crosses on the announcement, but the conclusions for EUR/USD are not that straightforwardly negative. Tariffs on the EU would mark an important escalation that can also harm the dollar, offsetting the hit on the euro."

"Anyway, the market's baseline will probably remain that a EU-US deal should be agreed by the 1 August deadline, and EUR/USD may not drift far from the 1.16-1.18 area unless US data surprise in either direction."