06:19 AM EDT, 07/31/2025 (MT Newswires) -- Eurozone Q2 growth was marginally better than expected, but at 0.1% quarter-over-quarter, it still proved unsupportive for the euro, even when accounting for the tariff distortions, said ING.

If the first leg of the EUR/USD correction was driven by the grim growth prospects for the eurozone after the European Union-United States trade deal, the drop to 1.14 was led by the Federal Reserve's hawkish repricing. In the bank's view, risks remain on the downside for EUR/USD, even though positioning is now looking considerably less stretched after the squeeze of US dollar shorts since the start of the week.

ING doesn't think the eurozone data will help the euro much.

Markets rushed to price out a European Central Bank cut -- only 15bps priced in by year-end -- after last week's central bank meeting, but low inflation paired with soft growth expectations can lead to a dovish rethink. Some comments by ECB members could accelerate that process, but August is generally a rather quiet period for ECB speeches, pointed out the bank.

ING thinks an extension of the EUR/USD drop to 1.130 remains possible -- that level acted as a temporary anchor in parts of April and May. The bank's view is that by the end of September, the pair will be back at 1.150, but there may well be more downside exploration before then.

The bank has a bearish view on Poland's zloty (PLN) for several weeks and the current sell-off in EUR has exposed this weakness in the Polish story over the last three days. Wednesday, ING saw some stabilization in EUR/PLN in the 4.270-280 range, which seems like a fair level for now.

However, Thursday's inflation numbers are a key moment for the central bank's (NBP) next direction, added ING. Market pricing isn't far from the bank's forecast, but the priced terminal rate still has roughly 25bps room to go lower, and if inflation confirms low levels, the market may frontload rate cuts.

As a consequence, ING believes there is more room for a push for a weaker PLN along with a weaker economy and the bank may see more movement towards the 4.290-300 range.