06:05 AM EDT, 06/05/2025 (MT Newswires) -- The European Central Bank is widely expected to cut rates by 25bps later Thursday, said ING.

This will take the deposit rate to 2.00%. Markets currently price a further 25bps cut by the Oct. 30 policy meeting, wrote the bank in a note.

ING sees the risk of the pricing of the next cut, after Thursday, being brought forward to the Sept. 11 meeting. The ECB is widely expected to be dovish on Thursday.

There could be some big downward revisions to the inflation forecasts, which would argue that the policy rate needs to go below neutral and into the accommodative area, stated the bank. Currently, the one-month euro ESTR rate priced one year forward sits at 1.60%. This could easily dip back to the 1.50% area and had seen 1.40% priced amid the April trade tumult.

The euro has been a slight laggard in the soft US dollar environment, and the G10 commodity currencies have been the best performers against the US dollar over the last week, according to ING. A dovish ECB on Thursday could briefly send EUR/USD back to the 1.1330/1360 area Thursday, but the bank expects more buying to emerge there ahead of what could be US dollar bearish nonfarm payrolls (NFP) release on Friday.

The rates curve of the Czech Republic's koruna (CZK) has moved roughly 6bps-8bps higher in the front-end, but markets are still pricing in almost two rate cuts, added ING. With June expected to show a stronger inflation number again, it's now clear that June is out of the question for the Czech central bank (CNB), while ING may question the August meeting as well, especially if the bank sees another upside surprise in inflation.

The CZK has been ING's favorite currency in the Central and Eastern European region for some time and after Wednesday's move, EUR/CZK is the lowest since June last year. The bank remains bullish, only Wednesday's move seems too fast and wouldn't be surprised by a correction to 24.850 before EUR/CZK goes further lower.

Wednesday's policy statement from Poland's central bank (NBP) brought nothing new, which in itself is rather hawkish, noted ING. In recent weeks, it has seen a reduction in household natural gas tariffs and a lower April print, which the statement didn't mention at all.

As a consequence, ING's best guess is that Thursday's press conference will be similar to May's, which in the context of the change in inflation profile could come off as neutral or slightly hawkish if anything. EUR/PLN on Wednesday peaked closer to 4.290.

At the same time, rates still point to levels around 4.260. The bank sees a 0.5% difference in the political discount after last Sunday's presidential election, and unless ING sees more escalation on the political side, EUR/PLN should head lower to 4.260, possibly even lower if the NBP surprises on the hawkish side.