06:11 AM EST, 03/05/2025 (MT Newswires) -- EUR/USD broke decisively higher on the prospect of a fiscal "bazooka" out of the eurozone, said ING.

The speed with which the Europeans are moving is "impressive," especially in Germany, wrote the bank in a note to clients. ING expects the focus now to be on whether the agreed fiscal changes in Germany move swiftly and easily through parliament over the coming weeks.

The prospect of large European stimulus is very present in European bond markets, where the German sovereign 2-10 year curve steepened a further 4bps on Tuesday.

In foreign exchange markets, the bank normally looks at the combination of looser fiscal and tighter monetary policy as currency positive. The slight problem for the EUR/USD story here is that the fiscal news hasn't moved the needle on European Central Bank policy expectations.

ING doesn't yet buy into this talk of the US dollar losing its reserve currency status. This looks more of a cyclical decline on soft United States data this year.

For the near term, however, U.S. activity data will probably be the determinant of whether markets trade up to 1.0670/80 on Wednesday -- or outside risk to 1.0800 were payrolls (NPF) to miss by a huge degree on Friday, stated the bank.

ING pointed out that its quarterly forecasts in the 1.00/02 area for Q2 and Q3 will be hard to achieve. Instead, EUR/USD may be more of a 1.03/04 story when broader U.S. tariffs come in next month.

Bank of England Monetary Policy Committee members Andrew Bailey, Huw Pill, Megan Greene and Alan Taylor testify at 3:30 p.m. CET Wednesday to the United Kingdom Treasury Select Committee on February's 25bps rate cut. This comes when markets are pricing just 57bps of Bank of England cuts this year compared with 72/73bp of easing priced for the Federal Reserve, added ING.

While the bank ultimately thinks that the BoE cuts three times this year, the recent mood music from the BoE doves -- Dave Ramsden -- has been caution and the need for gradual rate cuts. Sticky private sector wage growth has been the main problem.

Beyond the very dovish views of external member Alan Taylor, it's hard to see from where the dovish shock is going to emerge on Wednesday. GBP/USD is close to resistance at 1.2810, above which ING could see another leg higher in this rally.