ING Comments on Euro, Sterling, Poland's Zloty, Hungary's Forint, Czech Republic's Koruna

06:06 AM EDT, 10/02/2025 (MT Newswires) -- Eurozone inflation accelerated on Wednesday, with the headline consumer price index hitting 2.2% year over year while core stayed at 2.3% for the fifth consecutive month, said ING.

The figures were fully in line with market expectations and largely driven by energy prices, wrote the bank in a note

That said, data is vindicating the European Central Bank's cautious stance, and could keep dovish voices in the Governing Council quiet, stated ING. A quick scan of recent ECB member comments shows little to no dissent anyway.

Wednesday's price action in EUR/USD suggests the rally is looking a bit tired without any substantial catalysts at the moment, pointed out the bank. The yen (JPY) is its preferred channel to the euro (EUR) for United States shutdown risks, and the technical picture isn't as supportive for the common currency in the near term.

Risks remain tilted to the upside for EUR/USD, given that downside risks are more concentrated on the U.S. side, but a break above 1.180 may require new data inputs.

EUR/GBP corrected lower on some euro long squeezing on Wednesday, but seems to be lacking bearish momentum to trade back to 0.860. ING's model has recorded two consecutive weeks of around 1% short-term overvaluation in EUR/GBP, which may well be a signal of markets starting to price in some sterling (GBP) risk premium ahead of the United Kingdom budget.

While the announcement is only on Nov. 26, it's widely expected that many bits of the budget will be released to the media in the weeks before.

The bank agrees that risks mostly lie on the upside for EUR/GBP into year-end, also considering that ING is still expecting a rate cut by the Bank of England this quarter, which is only 6bps in the price.

This week, things have been quite quiet in the U.K. calendar. Investors heard from both sides of the hawkish-dovish BoE spectrum (Catherine Mann and Dave Ramsden), while Governor Andrew Bailey is due to speak on Friday. The lack of new data inputs makes it unlikely ING will see major deviations in off-meeting communication for now.

Foreign exchange saw some new support on Wednesday coming from rising market rates and a rebound in EUR/USD in recent days. EUR/CZK saw some reconnection with rates, which are seeing the highest levels since the end of 2024 at the front-end of the curve. This is likely a combination of a hawkish Czch central bank (CNB) and some fiscal premium and implied economic growth support coming from election headlines, suggesting a change in fiscal policy after this week's elections, added ING. As such, the koruna (CZK) remains the bank's favorite currency in the region and it expects EUR/CZK to gradually grind down towards 24.00 despite potential short-term volatility coming from the elections.

ING sees similar support elsewhere in the Central and Eastern European region. EUR/PLN bounced down from the upper edge of the current range on Wednesday, and for now, the current level looks more fair, where it can stay until the Polish central bank (NBP) meeting next week.

EUR/HUF returned to its lowest levels and Hungary's forint (HUF) continues to enjoy good support from the markets despite already heavy long positioning. Still, if EUR/USD continues to move higher, ING may see further pressure on EUR/HUF to go lower.

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