EUR: Not much the ECB can do - ING

Analysts at ING explained that it has been hard for President Draghi to talk down the EUR when its strength is driven by a solid domestic economy and the soft USD."

Key Quotes:

"Even at 1.25, EUR/USD is not out of sync with the short-term fundamentals. We target EUR/USD 1.30 this year. CEE FX remains in the sweet-spot."

"EUR/USD broke above the 1.2500 level for the first time since December 2014 as the market looked through ECB's President Drahgi’s attempts to calm strong EUR expectations either via referring to the currency's “volatility creating uncertainty” or seeing “very few chances at all for a rate increase this year.”"

No ECB rate hikes this year, but eventually helping the EUR in 2H18

"We agree with Draghi’s assessment on the deposit rate hikes. As per his comments, we don’t look for the ECB to start normalising the deposit rates this year. However, we still continue to see expectations of the eventual deposit rate normalisation as an important driver for EUR/USD in the second half of this year once forward-looking market participants start to meaningfully price in deposit rate hikes for 2019."

"We also note that the market is currently pricing around 5bp of ECB deposit rate hikes for this year. This is not aggressive and in turn reduces downside risks to the EUR from the eventual dovish re-pricing of the 2018 ECB deposit rate outlook (i.e. from 5bp to 0bp). We reiterate our long-held target of EUR/USD 1.30 by the year-end."