ING Comments on Euro, Sterling, Poland's Zloty

06:27 AM EDT, 07/15/2025 (MT Newswires) -- EUR/USD is consolidating as investors price up the next trade move, said ING.

So far, the European Union has refused to retaliate and hopes to negotiate its way out of the 30% tariffs imposed by United States President Donald Trump at the weekend. Failure to get that rate negotiated lower -- prior expectations were that it could be negotiated down to 10% -- would look negative for the region. However, it's going to be a "noisy" couple of weeks and the bank can't rule out the threat of even higher U.S. tariffs as Trump tries to get the deal over the line.

For Tuesday, U.S. consumer price index will be the main driver of EUR/USD, stated ING. But before that, investors will get an update on German ZEW investor expectations. These should come in on the strong side as investors focus on the medium-term benefits of German fiscal expansion. On the subject of fiscal policy, France is still dealing with large budget deficits and Prime Minister Francois Bayrou is due to unveil his fiscal consolidation plan on Tuesday, including 40 billion euros of spending cuts.

The bank will keep an eye on French government bonds, where failure to deliver spending cuts -- for example, the United Kingdom recently) seems to take its toll on local fixed income and foreign exchange.

EUR/USD is sitting above modest support at 1.1650. The foreign exchange options market prices a 59 pip EUR/USD range on Tuesday. The bank will see whether June U.S. CPI can add a little momentum to this bull market correction.

In quiet markets, the EUR/GBP run-up to 0.8700 has been notable, pointed out ING. This softness in sterling (GBP) hasn't been driven by the fiscal side. In fact, the 10-year Gilt-Bund spread has narrowed back into 187bps -- the tightest since early April. It has been the narrowing in shorter-dated interest rate spreads that is weighing on sterling.

Here, the two-year EUR:GBP swap differential has narrowed back into 157bps as investors question whether the Bank of England will have to ease policy faster than once per quarter. On that subject, investors will hear from Bank of England Governor Andrew Bailey at 10 p.m. CET Tuesday as he delivers his annual Mansion House speech alongside Finance Minister Rachel Reeves. The bank expects Governor Andrew Bailey to reiterate a position -- similar to the Federal Reserve -- that faster easing is possible if the labor market deteriorates.

On this latter point, after Wednesday's release of June CPI, Thursday sees some important U.K. labor market data. Should the May payroll release of -109,0000 stay unrevised and should there be further payroll declines in June, U.K. rates and sterling could see another leg lower. ING's forecast preference had been for EUR/GBP to grind towards 0.88 over the coming quarters. That could come a lot sooner if the labor market weakens.

The bank still sees a dovish case for Poland's zloty (PLN).

ING has been bearish on PLN since the July Polish central bank (NBP) meeting and the surprise rate cut. Although PLN has been underperforming the region in recent days, usually markets fade the move quickly and the PLN depreciation doesn't last too long. Still, since the last NBP meeting, the bank hasn't seen much of a local story and only the numbers from the economy and July inflation will be of more interest to the market.

ING still believes that dovish numbers will lead to more NBP rate cuts, more than the MPC now indicates and 50bps in September is on the table. Overall, markets should see constant pressure on PLN to weaken in the coming weeks and the bank still sees a target of 4.280-290 EUR/PLN.

MT Newswires does not provide investment advice. Unauthorized reproduction is strictly prohibited.