06:10 AM EST, 11/08/2024 (MT Newswires) -- EUR/USD traded briefly above 1.080 on Thursday on the back of the broad-based unwinding of post-election US dollar longs, said ING.

This appears to be a positioning unwinding and the bank doubts markets are reconsidering the negative implications of incoming President Donald Trump's expected policies on the eurozone.

ING published a revision of its EUR/USD forecasts in light of Trump's victory. The bank's core view is that the new Republican administration can widen the USD:EUR rate gap further as inflationary policies slow down Federal Reserve easing while the European Central Bank could move faster with cuts ahead of some protectionism-related impact on growth.

While ING's projected rate profile for the Federal Reserve and ECB is enough to justify EUR/USD trading below 1.05 throughout 2025, the bank has added a risk premium related to a potential worsening in global risk sentiment as well as idiosyncratic eurozone risk around the end of 2025 and beginning of 2026. This is when the bank expects the impact of U.S. tariffs to have the deepest market impact.

In the short term, ING thinks markets have entered a period where EUR/USD could oscillate around its recent range as markets shift the focus back to macro. However, the short-term rate spread argues for a weakening in the pair and the looming risks for the eurozone associated with Trump's core policies mean the bank retains a bearish bias on the euro.

ING pointed out that the Bank of England's Monetary Policy Committee at Thursday's policy meeting didn't give markets a clear conclusion about what the budget could mean for the economy, and once again there was no strong guidance on how fast rates can be cut.

The bank's house view on the BoE has been tweaked but not radically changed. A December rate cut is looking rather unlikely following the British budget and markets are also pricing in a very small implied probability. At the same time, ING doesn't think the budget will significantly derail the BoE's easing path next year and it still expects faster cuts in the spring compared with market expectations.

The rate/growth differential with the eurozone means there should be continued resistance on a substantial shift higher in EUR/GBP, according to the bank.