EUR: Some welcome news - ING

Despite the jump in short-dated US rates yesterday, EUR/USD has moved smartly higher on the back of the Trump-Putin story. Shortly before those headlines hit, the euro was also rallying on comments from European officials that they were currently negotiating with their US counterparts to try and avoid tariffs, ING's FX analysts Chris Turner notes.

EUR/USD correction to be a hard slog back to 1.0500/0530

"Progress on peace in Ukraine could be an important positive for European countries should it deliver lower energy prices and encourage broader investment on the back of something like a new Marshall Plan. Meeting customers this week we have been discussing some potential positives for Europe - given current above-average savings rates - if only confidence can improve."

"Yet it is the threat of tariffs that hangs as a dark cloud over a region and it seems unlikely that businesses or consumers will be able to conclude anytime soon that the tariff threat has receded. No doubt speculators are currently paring back euro short positions."

"Yet those positions are not extreme and the sticky US inflation story is keeping rate spreads very wide in the dollar's favour. That is why this EUR/USD correction will likely be a hard slog back to 1.0500/0530 with an outside risk of 1.0575."