06:13 AM EDT, 10/22/2024 (MT Newswires) -- The recent implicit shift towards growth concern in the European Central Bank narrative "automatically" places a greater focus on activity surveys like this week's PMIs and Ifo, which have previously been overlooked by the Governing Council, said ING.

However, before then, investors get a chance to hear from a long list of ECB speakers, noted the bank. On Tuesday, investors will get a TV interview with President Christine Lagarde and will hear from doves Fabio Panetta and Mario Centeno, neutral members Francois Villeroy de Galhau and Olli Rehn, and hawks Klaas Knot and Robert Holzmann.

It's quite common for ECB members to fine-tune the policy message in the period after a rate decision, stated ING. The key question is: are the hawks fine with Lagarde's "sanguine" disinflation view, a gradual shift in focus to growth and such a dovish market pricing? Given some lingering pockets of sticky services inflation in the eurozone, the answer is probably no.

However, unless PMIs show some sign of life on the activity side, convincing markets to price out some easing will be no easy task. Naturally, should the bank see signs of faltering resistance towards easing by arch-hawks like Knot and Holzmann on Tuesday, it expects the euro to feel some additional pressure.

Monday, hawkish member Peter Kazimir said the December decision is "wide open", quite a dovish shift from his pre-October meeting comments.

In the rest of Europe, ING will be keeping a close eye on the first of four speeches Bank of England Governor Andrew Bailey will deliver this week. EUR/GBP has room to rebound from 0.8300 as markets may prove rather sensitive to any dovish hint by Bailey, and also considering some pre-United Kingdom budget positioning can see some buildup of sterling (GBP) shorts.

Looking at GBP/USD, the bank's near-term bias remains 1.28.

However, Tuesday's highlight is the policy meeting at Hungary's central bank (MNB), according to ING. In line with expectations, the bank forecasts no change in rates at 6.50%.

The recent sell-off in the forint (HUF), along with the whole emerging markets space, has turned MNB hawkish and the pause in the cutting cycle has been highly communicated in the previous days. Even so, markets await another hawkish report and hints as to what central bankers want to see before returning to the rate cut discussion.

On the macro side, the central bank may be satisfied, added ING. Inflation is on target while the economy surprises more on the negative side. However, global markets aren't supportive and EUR/HUF above 400 is a warning sign for the MNB. The main question for Tuesday is how long the pause in the cutting cycle is.

Markets are pricing in the first cut in June after Monday with the terminal rate at 5.90%, roughly 130bps above the September lows. That seems too far to ING, but it makes no sense to go against markets in this environment.

Despite markets already being on the hawkish side, MNB won't have an easy job on Tuesday and communication will be key. However, ING believes the central bank is aware of the fragile situation and as such the HUF could see some gains on Tuesday, but it's probably too early for any significant recovery and every gain could be short-lived.