EUR: Eyes on Ukraine-Russia developments - ING

ING's original working assumption for this week was that the euro could still squeeze some data-linked optimism from the German fiscal bazooka, ING's FX analyst Francesco Pesole notes.

EUR/USD can depreciate below 1.07

"Yesterday's PMIs were underwhelming considering previous indications from the ZEW. The other side of the coin is that markets may not be expecting anything too big from the IFO surveys today, leaving room for a positive surprise to lift the euro."

"What may, however, be more relevant for the euro is any headline coming from Saudi Arabia, where a US delegation met with Russian counterparts yesterday following talks on Monday with Ukrainians. Russia and the US are reportedly due to issue a statement today about the progress of negotiations. Indications that some agreement is building around a full ceasefire would support European sentiment and the euro." 

"Barring that, fading optimism on a quick truce can make generally overvalued (in the near term) European currencies trade on the soft side. EUR/USD traded back below 1.080 yesterday. We see upside risks today given the US consumer confidence risk event, but our preference remains for a depreciation to <1.07 in April."