06:26 AM EDT, 10/09/2024 (MT Newswires) -- EUR/USD is showing no inclination to trade back above 1.10, said ING.

The bank noted it would normally argue that the prospect of fresh Chinese fiscal stimulus would be a euro positive - given the eurozone's relatively large share of exports to gross domestic product. However, the Middle East situation and the threat of higher oil prices is a large euro negative and one which will hold the euro back this month.

ING is "disappointed" that the EUR/USD rally stalled at 1.12 this fall and instead, 1.08 seems far more probable than a retest of 1.12. The bank continues to flat-line its multi-quarter EUR/USD forecasts at 1.10 until the outcome of November's United States presidential election is known.

There is very little on the eurozone calendar on Wednesday and while EUR/USD may press 1.10 on the back of early Wednesday's news out of China -- the ministry of finance will brief on fiscal policy this Saturday -- ING suspects sellers to emerge there.

The United Kingdom press is starting to reach a fever pitch with its speculation over what Finance Minister Rachel Reeves will present in her first budget on Oct. 30, wrote the bank in a note. Critics argue that the budget should have been presented earlier, which would have prevented this policy void from being filled by other news.

Investors remain on the lookout for any signs that the UK Gilt market is becoming nervous again about potential spending plans. It's true the 10-year Gilt-Bund spread has widened 25bps-30bps over the last month, although that may be as much down to miserable eurozone data than anything else, added ING.

Equally, the five-year UK sovereign CDS has barely budged from a very tight 21bp -- suggesting that there hasn't been a risk premium going into UK asset markets.

That said, it is becoming increasingly clear that the US dollar will now stay a little stronger into the U.S. election in November. This means investors haven't seen the lows for GBP/USD, according to ING. A correction towards the 1.29 area seems probable in the coming weeks.