06:04 AM EDT, 06/17/2025 (MT Newswires) -- EUR/USD price action is so far endorsing ING's call that markets aren't ready to take the pair much above 1.160 just yet, said the bank.

The upside risks aren't small, though, for instance, if markets are disappointed with the trade headlines from Canada and oil prices correct lower due to perceived abatement in the Middle East turmoil, noted ING.

On Monday, European Central Bank Governing Council member Joachim Nagel briefly mentioned the oil rally as a potential risk to price stability, and otherwise reiterated President Christine Lagarde's narrative that the ECB is in a good position with rates. But it is indeed oil prices that are likely to have the biggest impact on rate expectations at the moment, wrote the bank in a note to clients.

Unless Brent oil corrects further, markets may not really consider bringing the next cut forward to October.

The euro's contribution to EUR/USD moves remains minimal, but Tuesday's release of the ZEW survey in Germany can have some market impact, stated ING. The "expectations" gauge is seen rebounding further to 35.0, but concerns about the European Union-United States trade standoff could cap the upside.

The bank favors 1.15 rather than 1.16 as a near-term target and has a bearish bias on EUR/USD on Tuesday. But the quite evident market preference to buy the dips in the pair means risks are still generally skewed to the upside.

In Central and Eastern European (CEE) markets, ING sees improving conditions for another foreign exchange rally. Some spike in market rates due to the threat of higher energy prices from developments in the Middle East, in ING's view, correctly reflects expectations of more hawkish central banks in the region.

At the same time, the bank doesn't see a significant flight to quality globally and emerging market currencies strengthening generally. In addition, higher EUR/USD favors CEE currencies and ING expects more gains here across the board in the days ahead.

The Czech Republic's koruna (CZK) in particular should get attention on Tuesday, supported by hawkish central bnak (CNB) views, which should push EUR/CZK below 24.750, pointed out ING.

While Hungary's forint (HUF) and CZK currencies are near their local strongest levels and have maintained some gains this year, Poland's zloty (PLN) has underperformed its peers and is essentially the only currency unchanged against the EUR compared with the start of the year.

Given the hawkish bias of Poland's central bank (NBP) in recent weeks, ING believes the problem is a persistent premium in EUR/PLN coming from political uncertainty post-election. The interest rate differential itself suggests levels roughly around 4.230-240, indicating a 1% PLN rally if the market unwinds this political factor.

ING doesn't expect any immediate impact on fiscal or general government policy, and after last week's successful confidence vote, the bank doesn't see much reason for PLN to remain at weaker levels. In addition, the NBP is suggesting that another rate cut is more likely in September, while the market still prices in decent odds for July.

As a consequence, ING sees good reason to think PLN will catch up with CEE peers.