The rise in the German ZEW index yesterday was likely due to improved investors' sentiment ahead of expectations for a market-friendly change in government, but does not seem to mirror any real change in sentiment on growth, ING’s FX analysts Francesco Pesole notes.

More downside risks for the EUR/USD

"The Euro (EUR) continues to follow sentiment on the implications of Russia-US talks, and we are starting to observe some signs of relative underperformance of European currencies that we suspect will be exacerbated by Trump’s more transactional approach to European NATO allies."

"Our short-term fair value model continues to show zero risk premium (i.e. undervaluation) on EUR/USD, suggesting more downside risks related to a repricing of US protectionism risk into FX. We could see the correction run until 1.040 this week."