EUR/USD could be trading around 1.02 with 5.0% 10Y yields – ING

Economists at ING now see downside risks for EUR/USD potentially extending to 1.02 in a bond sell-off acceleration.

1.05 may be the bottom in current conditions

We estimate that an extension of the run in US treasury yields to the 5.0% mark would take EUR/USD to 1.02. That is not our base case, but the ongoing pressure on the Euro is clearly not confined to the US rates story.

Developments in the US activity story remain much more important, and if signs of weakness emerge across the Atlantic (and markets price in more Fed tightening) we expect a swift turnaround in EUR/USD, but that may not be a story for the near-term. Holding at the key 1.0500 support will be a success for those hoping for that turnaround to happen anytime soon.