06:10 AM EST, 12/06/2024 (MT Newswires) -- EUR/USD enjoyed a modest bounce on Thursday after bond markets concluded that they had priced enough of a risk premium into French markets, said ING.

The OAT-BUND sovereign spread narrowed back to levels seen a couple of weeks ago, wrote the bank in a note. In reality, French risk hadn't heavily hit the euro and ING doesn't see the need for EUR/USD to rally too far on news that far-right leader Marine Le Pen isn't seeking the ousting of President Emmanuel Macron.

However, political uncertainty will be unwelcome and French growth will still disappoint, stated the bank.

On the eurozone calendar on Friday is the final release of Q3 gross domestic product. Market pricing has very much now shifted towards just a 25bps rate cut from the European Central Bank on Thursday and short-dated rate spreads have turned a little more EUR/USD supportive, added ING.

Friday's United States nonfarm payrolls will determine how far EUR/USD needs to rally, according to the bank. Undoubtedly there will be quite a few protective EUR/USD buy stops above 1.06 now for those running short positions. Yet, ING suspects any corrective spike may fizzle in the 1.0630/0660 area and continue to see downside risks to its year-end target at 1.05.

In line with ING's expectations, the Czech koruna (CZK) and Polish zloty (PLN) saw another rally on Thursday and the bank's levels were reached in both cases, it stated. Given recent central bank communication, it seems that the gains may be more permanent in nature than ING previously expected.

EUR/USD eased pressure on weaker Central and Eastern European (CEE) foreign exchange while rate differentials widened significantly this week, said the bank. EUR/HUF has also seen some reversal in the last two days.

In addition, December seasonality is favorable for CEE currencies in general, especially CZK and PLN, which is partly also due to EUR/USD seasonality. However, Friday will be mainly driven by US jobs data and the US dollar (USD) channel.

Apart from this uncertainty, CEE foreign exchange should remain "supported," added ING.