Euro: Undervaluation and ECB succession – ING

Francesco Pesole at ING argues the recent EUR/USD drop is too sharp versus short-term rate differentials, with the pair around 2.1–2.3% undervalued in their models. He links this to tightened front-end spreads despite risk-off equities and expects EUR/USD to move back above 1.120, while ECB succession discussions should have only contained, short-lived impact on the Euro.