EUR: CPI can keep markets dovish on ECB – ING

EUR/USD traded briefly below 1.080 yesterday before revering later in the session. The euro remains rather resilient to the whole tariff story anyway: despite the EU being among the biggest victims of this week’s round of tariffs, European currencies are faring much better than China proxies or CAD, ING's FX analyst Francesco Pesole notes.

A move to 1.070-1.073 can be on the cards in the coming days

"What also may have helped the euro is a Bloomberg report suggesting that more ECB officials are ready to accept a pause in April. There is a possibility the ECB tipped the media as policymakers were uncomfortable with markets pricing in over 20bp of easing for the April meeting yesterday morning. The ECB probably wants to avoid a situation where it is led by market pricing to take a decision (cut) with the alternative (hold) being delivering a blow to an already turbulent bond market."

"Anyway, the implied probability of a cut as of this morning is still high (74%). We’ll see what the flash CPI report for March tells us today, but the indications were modestly dovish from Germany yesterday and the consensus is for a decline from 2.6% to 2.5% in core eurozone inflation."

"We remain generally cautious about following any EUR/USD rally into the tariff event and instead see mostly downside risks, barring any meaningful US data surprise. We still think a move to 1.070-1.073 can be on the cards in the coming days if the US goes ahead with an aggressive tariff plan."