06:24 AM EDT, 06/24/2025 (MT Newswires) -- Eurozone PMIs came in largely in line with expectations on Monday, signalling that business sentiment has stabilized after the tariff scare but still points to stagnation, said ING.

Earlier Tuesday, Ifo -- Germany's most prominent leading indicator -- increased for the sixth consecutive month on hopes that fiscal stimulus will boost growth.

The euro would benefit from an improvement in domestic activity indicators, but those are neither particularly likely nor necessary to take EUR/USD higher from here, wrote the bank in a note. That's because the euro continues to benefit from the buildup of US dollar shorts and its substitution value rather than any strong eurozone narrative.

Incidentally, the drop in oil prices means concerns about the erosion of EUR fundamentals are dissipating, stated ING.

EUR/USD is re-testing the 1.1630 intraday highs early Tuesday. Much of the direction on Tuesday will depend on whether markets find any dovish hints in Federal Reserve Chair Jerome Powell's testimony in Congress, which holds the keys for a decisive break higher. Barring that, the bank remains unconvinced that there is enough thrust to keep EUR/USD sustainably bid beyond the 1.1600 mark, considering the calm in the United States Treasury market and extensive overvaluation.

Markets will also keep a close eye on the NATO summit in the Netherlands, where NATO leadership is trying to build consensus on a 5% defense spending commitment, pointed out the bank.

Monday's market reactions to the weekend events in the Middle East were milder than ING expected in general. In the Central and Eastern European (CEE) region, Hungary's forint (HUF) took the biggest hit as expected, while the Czech Republic's koruna (CZK) remains the most resilient currency.

However, all currencies were weaker in EUR-crosses at the end of the day. The bank believes the weakness is only temporary and opens the market to interesting levels. At the end of this Middle East story for the CEE region, the bottom line is higher energy prices and more hawkish central banks.

For Hungary and the Czech Republic, this development likely means that any hopes for rate cuts this year are off the table, added ING. In Poland, higher energy prices are expected to slow down the pace of rate cuts. The likelihood of a rate cut in the July meeting is decreasing, with the next potential cut now anticipated in September.

Overall, ING sees more support for CEE currencies from central banks than two or three weeks ago. As a consequnce, any weakness is an opportunity to fade the market move.

In addition, CEE currencies are becoming more attractive in USD-crosses. As such, ING is more bullish after Monday's mild reaction in the region, where Tuesday's Hungary central bank (MNB) policy meeting should support HUF and Wednesday's Czech central bank (CNB) meeting will support CZK.