06:22 AM EDT, 04/29/2025 (MT Newswires) -- The euro has lost some momentum as the go-to European currency amid US dollar outflows, said ING.

Since the start of the week, it has been outperformed by all other G10 currencies except for the USD, Canadian dollar and New Zealand dollar, wrote the bank in a note. There is a possibility that massive power outages in Spain and Portugal -- now resolved -- affected the euro on the crosses, although there are broader considerations to be made too.

The option market positioning suggests the euro is the most overbought currency at the moment, stated ING. That is probably a more accurate indicator than CFTC figures, which focus more on speculative short-term flows and suggest the yen net-longs are much larger.

This must be weighed against macro and rates evidence that isn't supportive for the euro, pointed out the bank. There is a risk that the increased focus on the tariff impact on the United States and the boost in optimism from German fiscal stimulus may have disaccustomed markets with the narrative of soft eurozone activity.

A quarter-on-quarter gross domestic product print for the Q1 below the consensus 0.2% on Wednesday could be a trigger for unwinding some euro longs, and Tuesday's economic confidence figures can also have some foreign impact, added ING.

The European Central Bank has sounded rather dovish of late. U.S. Treasury Secretary Scott Bessent suggested the ECB will keep cutting rates to weaken the euro, noted ING. Even if that isn't the primary goal, it would surely be a welcome side effect for tariff-hit eurozone exporters. After all, a stronger trade-weighted euro is disinflationary and allows the ECB to err on the dovish side.

EUR/USD has dropped back just below 1.140 early Tuesday, noted the bank. ING could see some stabilization around these levels, or even some additional pressure on the pair before U.S. data comes into the equation later on Tuesday. Ahead of that, the bank thinks risks are tilted to another leg higher and potentially re-testing 1.150 in EUR/USD, even if the euro may not shine in the crosses.

Monday, financial markets followed ING's slightly bullish guidance in the Central and Eastern European region, with the Hungarian forint (HUF) leading gains. However, local markets were rather quiet and global sentiment, especially in Europe, still plays a major role here.

While ING's bullish view on the Czech koruna (CZK) is clear given its hawkish view on the Czech central bank (CNB), HUF presents something of a puzzle.

In recent days, ING has seen an impressive rally in rates and foreign exchange together. The rates rally is more understandable given the dovish shift in the Hungarian story, while foreign exchange is mainly driven by global sentiment, in the bank's view. Still, the result is a significantly narrower rate differential.

ING sees HUF gains as more temporary at the moment, although Tuesday's Hungarian central bank policy meeting may support EUR/HUF moving lower once again. The bank is forecasting that MNB will leave rates unchanged at 6.50% Tuesday, in line with broader market expectations