EU's Russian oil embargo will weigh on European growth - most directly through the negative income shock of the terms of trade decline. This makes life very difficult for the ECB and leaves our ECB-watchers at ING expecting that the central bank will not fully deliver on some of the more hawkish outcomes currently being priced into eurozone money markets. At the same time, one could argue that the Fed tightening cycle is built on more solid foundations and will occur at a time when 'household balance sheets are in great shape' - according to the Fed's Waller. We agree. In all, we expect the dollar later in the summer to push back to the highs seen in early May. - ING FX Strategy
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