EUR: Tariff threat dominates – ING

The emphatic nature of the tariff threat has proved a wake-up call for EUR/USD and traded volatility prices have jumped, ING's FX analyst Chris Turner notes.

A move below 1.0370 opens up 1.0330 and 1.0280

"We were never in the camp arguing that a global trade war had been fully factored into global FX markets and retain a view that EUR/USD can move to the 1.00/1.02 area in the second quarter as tariffs come in more broadly and the ECB cuts the deposit rate to 1.75%."

"We have been here before though. And any news of Canada and Mexico cutting a deal with Washington could see yesterday's EUR/USD losses turning around. But for the time being, the threat of tariffs and their impact on global growth is euro negative. And we expect investors to be adopting more defensive positions into next Tuesday's event risk."

"We see a short term window for EUR/USD to move lower and think that 1.0400/0420 intra-day resistance can hold and a move below 1.0370 opens up 1.0330 and potentially even 1.0280 ahead of next Tuesday."