06:07 AM EST, 12/10/2024 (MT Newswires) -- Germany's final inflation numbers brought no change to the headline number published previously with November unchanged at 2.2% year-on-year, noted ING.

Industrial production in Italy is also unlikely to make much difference to European Central Bank pricing for Thursday's policy meeting, said ING. Here, a 25 basis point rate cut seems a done deal for financial markets, although the bank believes the press conference may open up the discussion for more cuts later, implying a dovish outcome for the euro.

In the headlines Tuesday, investors could see the results of the two-day Eurogroup meeting of finance ministers, wrote the bank in a note. Otherwise, it should be a quiet day similar to Monday with the focus on Thursday's ECB meeting.

Still, given some rebound in United States rates, while the EUR side remains muted, ING saw some widening of the rate differential on Monday after more than a week of tightening spreads, indicating some reversal in EUR/USD. The pair bounced down after touching 1.060 on Monday with a close at 1.055, indicating some willingness to go lower after some positioning adjustment in recent days.

However, for more action here the bank will have to wait for Thursday's ECB meeting, which should show the next direction.

Friday's rating outlook upgrade from negative to stable from Fitch brought visible relief to Hungary's forint (HUF) Monday and ING believes the currency has put the worst behind it. Positioning seems already strongly on the short side at the moment, while Hungarian government bonds have seen new inflows in recent days.

In addition, December is seasonally positive for EUR/USD and Central and Eastern European currencies, which could provide some relief after two months of stress in the HUF market, stated the bank.

Although in the medium term ING thinks EUR/HUF will grind higher towards 420, tactically by year-end short positions could see some profit-taking. At the same time, the market is pricing in little Hungarian central bank easing in the coming years following the sell-off in November with two to three 25bps rate cuts, which is significantly less than ING forecast.

As a consequence, Monday's signs of calm in the HUF market could indicate a broader rally in HUF assets into year-end with attractive valuations.