06:40 AM EDT, 04/04/2025 (MT Newswires) -- The euro is proving the surprise beneficiary of the trade-driven sell-off in risk assets, said ING.

Normally, EUR/JPY has a strong positive correlation with risk assets, whereas this week, the euro has been holding its own, wrote the bank in a note. That has nothing to do with a positive reassessment of eurozone growth prospects.

No, the news there is terrible and could get worse should European Union trade officials -- meeting on Monday in Luxembourg-- decide to retaliate, stated ING. It's really only the trade blocs of the EU and China that have the economic muscle to retaliate.

Instead, the bank believes it's the alternative liquidity offered by the euro. No doubt this is something European policymakers are keen to explore -- and ING will be writing on the subject over the coming weeks on what needs to happen to make the euro a more attractive asset for foreign exchange reserve managers.

For EUR/USD, there is some massive trend resistance in the 1.11-1.12 area -- marking its bear trend off its 1.60 high in 2008. ING will probably need to see another big move lower in United States equities to take out that area near term.

However, the bank suspects buyers will emerge in the 1.1020 as doubts continue to grow about a sea-change in the US dollar's (USD) pre-eminent position as a store of value.

Over recent months, EUR/GBP has tended to sell off on tariff-related headlines, given that the eurozone is far more exposed to U.S. trade than the United Kingdom, pointed out ING. Yet EUR/GBP surprised on Thursday and spiked higher.

Two factors are at play, the bank thinks. The first is that the euro has better liquidity than sterling (GBP) and will benefit more as investors leave the US dollar. The second is that the looming global trade war is proving the greater leveller for rate spreads. The 'exceptionalism' of high U.K. interest rates is being unwound, where U.K. two-year swap rates fell 12bps more than their eurozone counterpart Thursday. This may be a dominant theme in the near term.

0.8475 is decent resistance for EUR/GBP, above which 0.8550 will be the target. Sterling is also a liquid reserve currency so it can benefit from the shift away from the US dollar. However, GBP/USD has come a long way in a short period of time and may be due for some consolidation in the 1.30-32 area, added the bank.

Thursday's Central and Eastern Europe (CEE) region reaction to the U.S. move triggered a strong dovish repricing in rates across the board, and foreign exchange came under pressure as expected.

ING's preference worked well and Poland's zloty (PLN) underperformed CEE peers, supported by a dovish turn by the governor of Poland's central bank (NBP) indicating possible rate cuts possibly as early as the next meeting in May, which is now ING's baseline.

ING believes the divergence between the hawkish Czech central bank (CNB) and dovish NBP will continue and sees PLN/CZK heading further down.

Overall, however, ING thinks some pressure on CEE foreign exchange will remain in the days ahead but should generally be dampened by higher EUR/USD and a rally in EUR rates, leading to little change in the CEE region's interest rate differential.