05:57 AM EDT, 06/04/2025 (MT Newswires) -- EUR/USD close to 1.145 was looking a bit too expensive and the bounce below 1.140 is probably due to some short-squeezing, said ING.

Some potential positive news on United States-China trade tensions this week argues against a quick return to early Tuesday levels (1.1420+), wrote the bank in a note. That is, barring some materially soft U.S. data on Wednesday.

Tuesday's eurozone inflation figures "incidentally" increased the chance of a more dovish message by the European Central Bank, stated ING. Aside from the print below the 2.0% target in headline inflation, core decelerated quite abruptly, from 2.7% to 2.3%.

In the bank's ECB "Cheat Sheet," it discusses how the overall message should be dovish, but that more references to the euro's (EUR) global potential can offset the negatives for EUR/USD.

Wednesday is rather quiet in the eurozone data-wise, with April industrial production and final PMIs for May being released. U.S. and European Union trade negotiators are, however, meeting in Paris.

ING's view on EUR/USD is unchanged: the bank thinks the pair can settle back close to 1.13 over the coming weeks, and that short-term rallies may still lose steam as it approaches 1.150.

ING expects a pause in the Czech central bank cycle at the June meeting and forecasts another cut in August, but that's still a long way off. However, given that the market is pricing in at least two rate cuts and there is some hawkish risk, the CZK is the bank's favorite currency in the Central and Eastern European region at the moment.

Elsewhere, Poland's central bank will discuss monetary policy on Wednesday. Rates are likely to remain unchanged at 5.25% and the council will wait for the new forecast in July, when ING thinks investors will see another 25bps cut.

More important will be the statement after the decision later Wednesday and Thursday's press conference, added the bank. The statement should reflect a much lower inflation profile given the downward surprise in April and the new household natural gas price tariffs announced.

At the same time, it may also show some commentary on fiscal policy after the presidential election, which may come across as a hawkish argument in the current environment. However, the market is already pricing in rate cuts to 3.50%, so the bias for potential surprises is more on the hawkish side, which could provide some temporary support for Poland's zloty (PLN), according to ING.