06:12 AM EDT, 04/09/2025 (MT Newswires) -- EUR/USD has rallied back above 1.10, banking on "idiosyncratic" US dollar weakness, said ING.

The 10-year Atlantic spread -- which has moved from 154bps to 175bps in the past 24 hours -- can have inverse correlations with foreign exchange rates if there are signs that markets are losing confidence in a broader spectrum of USD-denominated assets, wrote the bank in a note.

The euro remains in a good position to benefit from any USD confidence crisis, being the second most liquid currency in the world and a preferred alternative to the US dollar for foreign exchange reserves, stated ING.

Domestic soft growth is the normality for the euro but an abnormality for the US dollar, and the greenback stands to face asymmetrical downside impact from recession risk, pointed out the bank.

So far, the vicinity to an increasingly likely European Central Bank cut isn't harming the euro, added ING. If indeed the focus remains on the "sell America" narrative into next week's ECB meeting, a signal that the ECB is ready to ease policy while the Federal Reserve is stuck with inflationary fears might even have an abnormal positive effect on EUR/USD.

Tariff headlines will dominate again on Wednesday and the bank expects foreign exchange volatility to remain elevated across G10 and emerging markets. EUR/USD may find some extra support for now should it clear the 1.100 level.

With global sentiment improving on Tuesday, Central and Eastern Europe foreign exchange saw some gains, with Poland's zloty (PLN) leading the trend, noted ING. PLN weakened the most in the last week, in part due to the dovish Polish central bank (NBP) turnaround.

This is also the reason why the bank believes EUR/PLN won't go far from current levels. This is because dovish market pricing isn't only the result of a global story, as in the case of the Czech Republic and Hungary, but also a local one.

As a consequence, the global sentiment reversal shouldn't lead to a reversal of the losses from the previous days. So ING sees EUR/PLN more around 4.280 in line with the rate differential, while EUR/CZK should continue down below 25.100.

EUR/HUF reversed its way to 410 thanks to the turnaround in European equities, but even after Tuesday's rally, the bank doesn't see much reason to go below 406.