EUR: Rallying, but few reasons to be cheerful – ING

EUR/USD is net around 0.9% higher after the trade announcement. The main buying point for the euro is that it's a big, liquid alternative to the US Dollar – and that the dollar's troubles (weaker US consumption) are greater than the Euro's, ING's FX analyst Chris Turner notes.

Major medium-term resistance sits in the 1.11/12 area

"We also think that some medium-term factors are in place in that Washington does want a weaker dollar and that some major investor communities such as FX reserve managers will be looking to reduce the dollar share in their FX portfolio. Also, a lot of the language in Trump's Executive Order is very similar to that used in Stephen Miran's Mar-a-Lago accord paper – espousing the need for a weaker dollar in the longer term."

"While a global trade war in theory is a euro-negative, the soft underbelly of the US economy is the dominant factor for EUR/USD right now. A much sharper sell-off in US equities, dragging US rates even lower, adds another nail in the coffin of US exceptionalism and could send EUR/USD over 1.10. Major medium-term resistance sits in the 1.11/12 area. It's hard to call a major break of that unless US activity craters."

"For the time being, however, expect EUR/USD to trade off the US equity story, where memories will be stirred of protectionism causing major sell-offs."