Image © European Union, 2025. Photographer: Xavier Lejeune.

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ECB would cut rates in the event of a significant rise in the euro says European bank.

ING backs ongoing gains by the dollar, but warns the European Central Bank (ECB) will have a pain threshold.

In a new research note, ING says “appetite for the dollar is waning.”

At the same time, “the strong demand for pro-cyclical currencies, including the euro, is one factor drawing money away from the US.”

Uncertainties about U.S. policy into the U.S. midterm elections in November, which the Republicans are expected to find difficult, are anticipated to be another USD headwind.

“That is certainly the message from the options market, where dollar puts are in demand,” says ING.

But because U.S. growth remains reasonably strong, we’re facing “a dollar dip, not a collapse.”

“Unless the outlook for US bond and equity market returns deteriorates substantially (not our base case), we continue to favour EUR/USD edging up to 1.22 area in an orderly manner,” forecasts ING.

However, there could be a line in the sand that policy makers won’t want crossed. “Any overshoot to 1.25 could well prompt a European Central Bank rate cut,” says ING.

The ECB tends to not comment on the euro’s value, judging that silence is in itself a compelling policy tool.

However, it does plug into inflation forecasts, and a materially stronger euro implies materially lower import costs, which would weigh on inflation and invite speculation of a cut.

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