06:04 AM EDT, 09/03/2024 (MT Newswires) -- EUR/USD found some backing Monday and given that part of its weakness at the end of August was likely due to month-end flows, support levels may prove sturdier at the start of September, said ING.

A two-year EUR:USD spread at -100bps is still some 20bps-25bps tighter than the end of July and continues to offer a technical counterargument to bearish bets on EUR/USD, wrote the bank in a note.

Some of those bearish bets are linked to Germany's stagnant economic situation, but it seems that investors were rapidly reassured of the political situation after all other German parties appeared determined to keep the far-right AfD away from power after their win in Thuringia, stated ING. At the same time, the ruling coalition appears increasingly weak, and the bank cannot exclude some damage to the euro from European Union politics down the road. Especially when adding a likely turbulent EU budget season this fall.

For now, those like ING seeing EUR/USD holding above 1.10 will be "happy" with some support ahead of key United Stats data later this week.

In the eurozone, the data calendar is empty on Tuesday, and the only scheduled European Central Bank speaker is German hawk Joachim Nagel, pointed out ING.

The United Kingdom calendar is very quiet this week and the bank expects sterling to move in line with global risk sentiment dynamics. Tuesday, Bank of England (BoE) Monetary Policy (MPC) member Sarah Breeden speaks at an event on supervisory cooperation, so may not touch upon monetary policy. Breeden has been standing on the neutral side of the hawk-dove spectrum and voted in line with the MPC majority at all meetings.

EUR/GBP is probably awaiting the catalyst for the next big move: either a break below the 0.8380 lows for the year or a return to the 0.85 area. ING has generally seen more arguments for EUR/GBP to ultimately move back higher over the past few months, but admits that the BoE or UK data haven't offered strong reasons for a material retightening in EUR:GBP rate spreads, meaning the risks are probably quite balanced for the pair in the near term.