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

one-week historical volatility is back below 7.0, confirming markets' extra caution in dealing with United States President Donald Trump's tariff announcements, said ING.

By comparison, this peaked at 20 in April and was above 9.0 only a couple of weeks ago. What is also worth noting is that the one-month 25-delta risk reversals — the difference in price between calls and puts — have returned to zero, wrote the bank in a note.

That had fallen to negative territory in June, but bounced back rapidly. Should this decline prove sustainable, it would signal markets are seriously scaling back bullish views on the pair — another testament of how the US dollar (USD) isn't bearing the risks associated with this round of tariff announcements for now, stated ING.

A U.S.-European Union trade deal seems imminent, with reports suggesting the European Commission's interim draft should include asymmetrical tariffs on EU products — likely the 10% base tariff — effectively choosing to de-escalation path, according to the bank. That is likely priced in by now, and barring major surprises in the details of the deal, may stay attached to the 1.170-1.175 area for now.

In the absence of relevant eurozone data, ING will keep monitoring European Central Bank speeches. Wednesday, Governing Council member Robert Holtzmann reaffirmed his ultra-hawkish stance by saying rates shouldn't be lowered any further, while the more moderate Joachim Nagel didn't rule anything out. Thursday, investors will hear from three dovish-leaning members: Fabio Cipollone, Jose Luis Escriva and Francois Villeroy de Galhau.

Norway released June consumer price index figures earlier Thursday. While headline inflation undershot expectations for an increase by staying flat at 3.0% year over year, underlying CPI accelerated from 2.8% year over year to 3.1%, faster than the consensus 3.0%. A key argument for Norges Bank's surprise June rate cut was that underlying inflation was back below 3.0%, pointed out ING.

As that drop didn't prove sustainable, there is little room for Norges Bank to cut again already in August, it added.

has been little touched by the release, as markets were already pricing in little to no chance of an August cut, while the dovish tilt in June may prevent substantial unwinding of September rate cut bets.

The bank's view is bearish. The impact on risk sentiment from Trump's new wave of tariff announcements has been minimal, and the pair is trading 3.0% above its short-term fair value according to ING's model. This is primarily due to the euro's (EUR) outperformance, which may, however, lose some steam as concerns about eurozone growth may arise in the coming months. A return to the 11.50 handle in would be entirely in line with fundamentals.

ING believes a rate hike may be more likely than rate cuts for the Czech central bank (CNB).

This leads the bank to a bullish view on the koruna (CZK) despite currently strong levels. While the first hike may still be a long way off, the persistent hawkish tone versus Central and Eastern European (CEE) peers and the Federal Reserve and ECB still in a cutting cycle should further support lower.

ING sees 24.500 as a first stop, outperforming CEE peers.

might have found a short-term anchor at 1.17, said ING.

Despite the post-NFP (nonfarm payrolls) hawkish repricing in the US dollar overnight index swap curve, the two-year swap rate gap remains 15bps-20bps wider than a month ago, wrote the bank in a note. This means that while some USD risk premium remains present at around 1.170, the US dollar isn't as "screamingly cheap" as it was in early June.

The eurozone data calendar isn't particularly busy this week, and the focus should be primarily on some European Central Bank speakers, stated ING. Wednesday, investors will hear from Philip Lane, Luis de Guindos and Joachim Nagel.

Given the return of tariff threats to the European Union, the risks are skewed to some slightly more dovish comments in the coming days, although, like markets, the Governing Council may tread very carefully when guessing President Donald Trump's ultimate trade plan. The U.S. President said on Tuesday that a letter to the EU outlining the new tariff rate was "two days off." Investors could see the euro face some pressure on the crosses on the announcement, but the conclusions for aren't that straightforwardly negative.

Tariffs on the EU would mark an important escalation that can also harm the US dollar, offsetting the hit on the euro, pointed out the bank. Anyway, the market's baseline will probably remain that a EU-U.S. deal should be agreed by the Aug. 1 deadline, and may not drift far from the 1.16-1.18 area unless U.S. data surprise in either direction.

ING believes that Hungary's central bank will leave rates unchanged this year. There was little market reaction to Tuesday's inflation numbers, but core rates pushed the entire Central and Eastern European region higher, with forint (HUF) rates under the most pressure. Despite this, the foreign exchange rally has run its course in recent weeks and the bank considers 400 to be a "fair" level for now, unless there is a more noticeable spike in HUF rates in the coming days.

Reports suggest the European Union might be able to secure a decent trade deal with the United States after all, noted ING.

The EU's negotiating leverage of a community of 450 million consumers is leading to reports that the baseline 10% U.S. tariff on EU imports can be maintained, while there might be some better carve-outs for the aircraft or drinks industries. There are still big challenges with auto tariffs at 25%, and one of the biggest shoes to drop is what happens in the pharma sector, wrote the bank in a note.

initially came lower on the news of tariff letters on Monday — probably on the view that an equity sell-off was going to cause de-leveraging of short US dollar positions, stated ING. But in the end, the fallout on equities hasn't been severe at all, and investors are probably happy to sit there slightly long .

One story that has caught the bank's eye early Tuesday is a new EU issuance coming to the market later in the day — potentially looking for 10 billion euros in seven- and 20-year debt. This will be one of four syndicated issuances in the second half.

Tuesday, ING could see some strong headlines in terms of demand or pricing levels for this joint EU offering. And perhaps in quiet summer markets, the bank could even see some direct impact on if a lot of international demand for EU debt goes through to settle this transaction.

consolidation in a 1.1710-1.1830 range looks likely near term.

The current forint (HUF) rally is over, according to ING. has been rejected several times at 398.5 and on Monday, under risk-off sentiment, returned up near 400. This was the bank's target before.

Romania's central bank (NBR) is likely to leave rates unchanged at 6.50% on Tues day in line with expectations, noted ING. Although the NBR's decision should be a non-event, market attention will be on comments regarding the inflation outlook and fiscal situation.

The latest inflation numbers show some upward pressure, while fiscal consolidation indicates the need to raise some taxes including VAT (sales tax) and excise, raising inflation further.

On the fiscal side, although foreign exchange and bonds have seen some rally after positive headlines, markets seem to have exhausted themselves a bit and the overall story is taking longer than expected, added the bank. In the second half of June, moved from lows of 5.020 to highs of 5.085 and has since moved rather closer to the upper boundary.

now has more freedom than in the past and the deep current account deficit is weighing on the leu (RON). At the same time, the fiscal story is taking too long and those who had positions in bonds or foreign exchange are taking profits, avoiding the risk of any change in direction.

It is hard to read the next direction in foerign exchange but ING expects the upper end of the mentioned range to be tested.

It wouldn't be a complete surprise to hear the White House threatening the European Union with broad 50% tariffs, with a comment such as "there is nothing they can do to avoid these tariffs," said ING.

Financial markets have learned, however, not to take these comments at face value and any dip on such a headline would likely meet buyers, wrote the bank in a note to clients.

As for the EU's negotiating position, reports suggest the bloc is split, pointed out ING. Apparently, Germany and countries within its auto supply chain network are looking for a quick deal to generate some certainty. On the other hand, France and Spain are said to prefer a tough negotiating stance and retaliatory measures.

Reports of a two-month extension for a deal to be made seem quite credible, too, stated the bank.

In terms of sectors, the EU is also trying to negotiate down 50% tariffs on steel and aluminium, 25% on cars and avoid a big tariff on the pharma sector, which would hit Ireland particularly hard. News on Friday that the United States is close to reaching a deal on pharma with Switzerland lifted healthcare stocks and could be a positive here.

It's hard to expect another big rally on this week's trade news, noted ING. There is an outside risk to the 1.1900/1910 area if the U.S. misjudges the mood and equities are marked heavily lower. But that seems unlikely.

The bank tends to favor consolidation in a 1.1700-1.1830 range this week, although again, ING would avoid trying to pick a top in .

The eurozone data calendar is also light this week. In terms of political news, this Friday's passage in the German upper house of nearly 50 billion euros in fiscal stimulus could be a reminder of the sea-change for domestic demand prospects in Europe — a multi-year positive, added the bank.

is staying relatively bid even as stress in the United Kingdom Gilt market abates. The fall-out from last week's U-turn on welfare reform is a broader understanding that taxes are going to have to go up in November, according to ING. The weaker sterling (GBP) story then switches from a sovereign risk premium story to a more conventional one of tighter fiscal and looser monetary policy.

Some slightly better U.K. monthly gross domestic product data this Friday could generate some sterling support, but the bank suspects 0.8600 now proves the near-term floor for .

Last week, investors saw an "earthquake" shake market expectations in Poland, and the zloty (PLN) will remain in the spotlight this week, said ING. The dovish turn of Poland's central bank continues to drive the market, and market expectations have moved to 3.50% for the priced terminal rate.

lags "significantly" with the movement in rates, and this week the bank expects this gap to close. The rate differential points to levels around 4.280-290. It will, however, take some time to get there, in ING's opinion.

Elsewhere, the bank remains bullish on the Czech koruna (CZK), while ING is neutral on the Hungarian forint (HUF), which it believes has rallied sufficiently for now. Of course, the focus will be mainly on the U.S. trade story and Wednesday's tariff deadlines.

In general, however, Central and Eastern European currencies shouldn't be the main ones exposed and the shield from a stronger EUR should protect the region from a possible risk-off sentiment, it added.

The US dollar was mixed against its major trading partners early Friday — up versus the yen and Canadian dollar, down versus the euro and pound — ahead of the release of personal income, spending and price data for May at 8:30 am ET.

Federal Reserve Governor Lisa Cook is due to speak at 9:15 am ET, followed by the final University of Michigan consumer sentiment reading for June at 10:00 am ET and the Kansas City Fed's services reading for June at 11:00 am ET.

The Atlanta and St. Louis Fed banks are due to update their gross domestic product Nowcast estimates for Q2 around midday.

A quick summary of foreign exchange activity heading into Friday:

rose to 1.1718 from 1.1706 at the Thursday US close and 1.1708 at the same time Thursday morning. Eurozone consumer confidence and business conditions readings both declined further below the breakeven point in June, according to data released earlier Friday. The next European Central Bank meeting is scheduled for July 24.

rose slightly to 1.3734 from 1.3733 at the Thursday US close and from 1.3723 at the same time Thursday morning. There are no UK data on Friday's schedule. The next Bank of England meeting is scheduled for Aug. 7.

rose to 144.5548 from 144.3770 at the Thursday US close and 144.2528 at the same time Thursday morning. Tokyo year-over-year consumer price growth, an early indicator for Japan's consumer price index, slowed in June while the May unemployment rate held steady and retail sales growth slowed in May. The next Bank of Japan meeting is scheduled for July 30-31.

rose to 1.3658 from 1.3634 at the Thursday US close but was below a level of 1.3686 at the same time Thursday morning. Canadian GDP data for April and May are due to be released at 8:30 am ET, followed by Canadian budget balance data for April at 11:00 am ET. The next Bank of Canada meeting is scheduled for July 30.

ING said 1.20 is within reach for , but it's mostly United States factors that hold the key to the next move.

The bank's baseline scenario is actually that will settle just below current levels — around 1.15-1.16 — as markets' dovish bets prove misplaced, but ING concedes that upside risks for the pair remain high before the data endorses its view.

Friday, investors will see the first flash consumer price index estimates in the eurozone. French inflation is expected to remain below 1.0% year-over-year after the recent deceleration, while Spain's harmonized CPI is seen accelerating to just above 2.0% year-over-year. Barring major surprises there, markets will likely wait until Monday's German numbers are published to draw any conclusions for the European Central Bank.

Speaking of the ECB, investors will hear from three Governing Council doves on Friday: Francois Villeroy, Olli Rehn and Piero Cipollone. ING will see whether the drop in oil prices triggers some pushback against the hawkish repricing in the euro (EUR) curve.

Central and Eastern European currencies again saw further gains on Thursday following a weaker US dollar, hawkish central banks in the region and general risk-on sentiment, stated INH. Most interestingly, broke the key 400 level and is getting into territory where the bank is becoming less bullish.

At the same time, Hungary's central bank (MNB) released its inflation report on Thursday, and the details of the new forecast suggest some downside risk to inflation, especially in June and July when the market could begin to get the impression that a dovish turn is imminent. The bank thinks the MNB will ignore the temporary drop in inflation and wait until next year.

However, global conditions led by core rates are pushing Hungary's forint (HUF) rates down already, which should eventually hinder further HUF gains, added ING. Still, this may not be the main driver, and other factors may push down further, but ING is becoming more cautious here.