EUR: Target met at 1.0427, but still reluctant to chase higher

We stick to our call that EUR/USD will start to lose support once crossing 1.040, as the euro remains broadly unattractive from a macro fundamental perspective and Trump has indicated that the EU should be next on the tariff list. A EUR:USD two-year swap rate gap at -185bp is a mirror of that – via the monetary policy channel – and a key disincentive to chase EUR/USD much higher.

Domestically, the eurozone calendar is quite quiet for the remainder of the week. Trade news will dominate in EUR/USD price action, although we’ll be interested to hear whether the slightly hotter-than-expected inflation figures trigger some minor change in the narrative by ECB members. Chief Economist Philip Lane speaks this afternoon.