EUR: The pain trade continues - ING

EUR/USD continues to grind lower as it has for the last week. Rate differentials have not moved much at all this week and in fact have been mildly supportive for EUR/USD. But other factors are at play. At the start of the week, we had wondered whether the tightness in US money markets had been playing a role here, ING's FX analyst Chris Turner notes.

EUR/USD has some support at 1.1450

"However, overnight borrowing at the Fed's Standing Repo Facility has come down a little this week, suggesting some improvement in conditions. We had also wondered whether Alphabet's €6bn multi-tranche Reverse Yankee deal this week might have been depressing EUR/USD. This deal settles tomorrow, so its impact, if any, should be over soon."

"Instead, it looks more like demand for dollars as investors pare back pro-risk positions is catching EUR/USD in the cross-fire. Additionally, we think EUR/USD is probably being dragged lower by GBP/USD. Here, UK Chancellor Rachel Reeves' speech yesterday, viewed as a budget without any data, has been seen as laying the groundwork for a possible tax hike. But Bank of England easing expectations have not moved much this week and the losses in GBP/USD probably have more to do with the global equity correction."

"GBP/USD has some decent support at 1.2950/3000, EUR/USD has some support at 1.1450 and let's see what the ADP data has to offer today."