06:06 AM EDT, 08/06/2025 (MT Newswires) -- The eurozone's July PMIs were revised marginally lower on Tuesday, but that isn't meaningful for a market short on input from the euro side, said ING.

EUR/USD remains almost entirely driven by the US dollar, and ING continues to see decent upside potential mostly on the back of the Federal Reserve's dovish repricing rather than any supportive eurozone story.

Looking only at post-'Liberation Day' trading from April 2, EUR/USD looks "cheap," stated ING. The two-year EUR/USD swap rate gap (-140bps) is 5bps narrower than it was at the end of June, when the pair was trading at 1.180.

If the bank broadens the scope, the story is different. In September 2024, the spread was at -85bps, yet EUR/USD traded just below 1.12. The force that might be pulling the pair from trading higher could be a partial reassessment of the US dollar risk premium, specifically from a growth angle.

While the United States payrolls now make a September Fed cut more likely, the U.S.-European Union trade deal partly dents the euro's attractiveness as an alternative, wrote the bank in a note.

ING's view is that markets aren't ready to take that USD risk premium reassessment much further, with President Donald Trump's trade policies and his pressure on the Fed keeping the medium-term bearish USD narrative compelling.

The bank's near-term target remains 1.17 and it sees further gains later this year, but ING acknowledged that the EUR/USD's ability to rally within the 1.15-1.20 region isn't as smooth as it was a couple of months ago.

Wednesday brings a series of economic releases from Hungary and the Czech Republic, pointed out the bank.

The priced terminal rate for next year at Hungary's central bank has risen to close to 6%, according to ING. In recent days, the bank has seen some correction to the current 5.65% and it still predicts more room for downside if the economic and inflation figures confirm the dovish case.

This should also be visible in currency trading, where EUR/HUF remains anchored in the 398-400 range for now, but more dovish pricing should again bring some pressure on the forint (HUF), noted ING.

All eyes are on Thursday's Czech central bank (CNB) meeting, where the central bank will also present a new forecast. Even though the Czech Republic's koruna (CZK) rates saw higher volatility amid weak summer liquidity, EUR/CZK is surprisingly stable despite the rapid movement in EUR/USD.

Although from an investor's perspective, CZK may not provide enough juice given the previous movement, the bank still prefers to be long here. CNB could still surprise with a degree of hawkishness, and the downside risk seems very limited given that the local story seems clear and global factors do not seem to be affecting the CZK market much lately, it added.