EUR: The ECB is sounding pretty dovish – ING

The mood music coming from the European Central Bank (ECB) sounds pretty dovish, with some even happy to speculate over 50bp of rate cuts, ING's FX analyst Chris Turner notes.

The worst case for EUR/USD is probably 1.1250

"Concerns over inflation seem to have largely evaporated, and tomorrow's release of the ECB survey on one and three-year inflation expectations may help. Consensus expects both of these numbers to drop. The ECB may also be worried about the strong euro, where the nominal trade-weighted is at record highs and is up 4% year-on-year. With the Rest of the World fighting over a smaller share of the global demand pie, currency strength is not what a big exporter wants right now."

"This week also sees eurozone first quarter GDP data and the flash release of April CPI data on Friday, where core could inconveniently pick up to 2.5% YoY. As for EUR/USD, the euro does stand to be a major beneficiary from the flight from dollars, but there is still little evidence of foreign reserve managers leaving US Treasuries. And actually, the US 10-year swap spread (a measure of US sovereign credit risk) continues to be priced at less extreme levels."

"This week will also see some high-profile earnings reports from the likes of Amazon, Microsoft, Apple and Meta. Their fallout on US equities will probably also continue the recent positive correlation between US equities and the dollar. Expect EUR/USD to continue trading around 1.1300-1.1400 for the time being. The worst case for EUR/USD is probably 1.1250, should US data surprise on the upside. 1.1500 is the risk, should any of this week's job releases suggest that tariff uncertainty has already triggered layoffs."