EUR: Another leg higher in EUR/USD may be inevitable – ING

European currencies continue to gain ground, supported by a rotation out of US assets, ING's FX analyst Francesco Pesole notes.

A move to 1.150 in EUR/USD seems to be premature

"Markets might also be partly factoring in last week’s unexpected Reuters report that the European Central Bank has asked banks to stress test their USD funding needs amid concerns the Federal Reserve could restrict access to emergency USD swap lines. While this scenario appears somewhat unlikely, should the risk be deemed credible, it could prompt even faster diversification away from the dollar."

"We generally deem c given the lack of hard evidence on the economic damage in the US from tariffs. To be sure, if the G7 summit fails to offer signs of trade de-escalation, and above all, Treasury markets remain under pressure, another leg higher in EUR/USD would be inevitable."