06:02 AM EDT, 10/07/2025 (MT Newswires) -- The latest reports suggest French President Emmanuel Macron has given the outgoing Prime Minister Sebastien Lecornu until late Wednesday to try and work with a fractured parliament to find a new prime minister, said ING.

It isn't clear what would happen if Lecornu fails, with the options presumably being a pure technocrat for the job or early elections, wrote the bank in a note.

Betting markets currently price a 57% probability that early elections are called by the end of this month. But, it isn't clear that early elections will solve anything, stated ING.

The bank expects currency traders to keep one eye on the OAT-Bund bond spread over the coming weeks and months. A move through 90bps would raise some alarm bells and add to some independent weakness in the euro (EUR).

EUR/USD has been finding support at 1.1650, but it feels like downside risks are building in the absence of fresh news from the United States, pointed out ING.

Tuesday, investors will see several figures from the real economy in the Central and Eastern European region, led by industrial production in the Czech Republic for August. Still, the main topic should be the Czech market after the parliamentary election on Saturday and Monday's lower-than-expected inflation, added the bank.

For now, it seems that inflation, at 2.3% year-on-year and 0.3pp below the Czech central bank's (CNB) forecast, has overshadowed the impact of the elections on the market. The main driver was a surprise decline in food prices, while service prices remain unchanged in year-on-year terms.

As a consequence, ING believes that this doesn't change the CNB's narrative too much and it won't see a reversal in forward guidance.

However, the short end of the curve has fallen, leading to a significant narrowing of the interest rate differential, suggesting some trouble ahead for the strengthening koruna (CZK) and keeping EUR/CZK at 24.350 for some time.

However, since the bank believes that the CNB story remains unchanged and inflation should accelerate again in the coming months, ING doubts any near-term koruna weakness will be more than temporary.