EUR/USD: A return to 1.10 is possible today – ING

The Euro felt some pressure on Tuesday as the Italian government announced a surprise windfall tax on bank profits. Economists at ING analyze EUR/USD outlook.

Bank stocks appear to find some breathing room

This is one interesting thread to monitor, should the Italian government's decision fuel a bank profit windfall tax debate in other countries, and/or whether banks will pre-empt facing new taxation by raising deposit rates. The implications can be non-negligible from a monetary policy transmission perspective and for the Euro. In the near term, the relevance of relative equity performance for EUR/USD should keep it quite sensitive to the matter.

A return to 1.10 is possible today as global risk conditions improve and bank stocks appear to find some breathing room.