EUR/USD to rise only once the dollar embarks on a structural downward trend - ING

"The cautious and dovish ECB bias today underlines the lack of domestic reasons for a meaningful EUR upside. We expect EUR/USD to rise persistently but only in response to structural USD weakness and for this to happen, we still need to wait a few more months," ING analysts note.

Key quotes

"We see EUR/USD embarking on a more pronounced and persistent upwards trend only when the dollar peaks. Given our view, the Fed is not done yet with the tightening cycle (our economists look for two more Fed funds rate hikes this year, after the initial pause in coming months) this suggests a modest downside to EUR/USD in the coming months. We target EUR/USD 1.12 in three-months before a recovery to EUR/USD 1.20 by year-end as, by then, we expect the dollar to peak and embark on a structural downtrend."

"Our take on the drivers behind the expected EUR/USD upside later this year (weak USD, rather than strong EUR) also means that even with higher EUR/USD in 2H19, central and eastern Europe FX is unlikely to be a meaningful outperformer in the wider emerging markets FX space as was the case in 2017 (remember when the Czech koruna and Polish zloty were the two best performing EM currencies)."

"This is because if higher EUR/USD is caused by a weaker USD (and not a strong EUR), this also benefits other EM FX regions and not exclusively CEE FX (which back in 2017 was the chief beneficiary of the ECB induced EUR rally vs its EM peers). The CEE FX segment should do well in USD terms later this year, but unlikely to be a significant outperformer in the more extensive EM FX space."