05:58 AM EDT, 10/29/2025 (MT Newswires) -- EUR/USD lost some ground overnight Tuesday and is lagging other G10 currencies this week, said ING.

Markets are instead favoring a rotation to China proxies such as the Australian dollar (AUD) and the New Zealand dollar (NZD), with the former also helped by hot inflation overnight, and the yen (JPY), which benefited from some verbal intervention, wrote the bank in a note.

It appears to ING as another signal that markets are becoming more focused on domestic events and relative value in foreign exchange. Some good activity surveys out of Germany in the past few days -- PMIs and Ifo -- aren't enough to prop up the euro (EUR).

The consensus view is that Thursday's European Central Bank meeting will be a non-event, stated ING. The implications for EUR/USD are likely to be limited, and Wednesday's FOMC should be the only input -- if anything -- for direction in the pair.

The bank sees some "modest" upside risks for the US dollar (USD). That may not be enough to take EUR/USD sustainably below 1.160, though, and the short-term outlook for the pair remains neutral -- at least until United States jobs data is published.

The Central and Eastern European (CEE) region remains in "hibernation," awaiting the ECB and Federal Reserve and more data in the second half of the week, added ING. However, on Tuesday, the bank saw a decent dovish headwind in the zloty (PLN) and forint (HUF) rates market, while the koruna (CZK) market was closed for holidays, and on Wednesday should catch up with this move.

Although foreign exchange was more or less stable on Tuesday, ING believes that the drop in rates can somehow offset the support from higher EUR/USD and global risk-on mood in the coming days.

Although the ECB and Federal Reserve shouldn't be big game changers, they will still be the main drivers for CEE foreign exchange this week. Positioning remains significantly on the long side, especially in the case of HUF and to some extent PLN as well, making both currencies sensitive to any surprises on the global side if a stronger US dollar again in the coming days, although this isn't the bank's baseline.

In this context, attention should also be paid to Thursday's gross domestic product figures in Hungary, where ING's estimate is "significantly" below market expectations, which could once again renew some market bets on central bank (MNB) rate cuts, and undermine HUF strength after reaching the current lows of 388 EUR/HUF.