EUR: Tariff risks look under-priced - ING

After a violent first half of the month, the EUR/USD market is calming down. One-month traded volatility has fallen to 7% from 9%, and one week has fallen to below 8% from above 11%, ING's FX analysts Chris Turner notes.

EUR/USD can be dragged to 1.0730 in the near term

"Stability in US asset markets has certainly helped, as has a rethink about how quickly new fiscal stimulus or defence spending stands to lift eurozone growth. Notably, during all this month's volatility, the market still prices the landing rate for the ECB easing cycle in the 1.75-2.00% zone - i.e. there has not been a substantial upward revision here."

"We do, however, think that financial markets are under-pricing the risk to the euro from next week's tariff news. The EU (led by Germany) runs a large trade surplus with the US and will likely, alongside China, be at the forefront of Washington's reset on global trade. We've got a 1.05 forecast for EUR/USD by the end of the second quarter on the back of the tariff story."

"EUR/USD has support at 1.0765/70 and could be dragged to 1.0730 if the pound weakens."