05:58 AM EST, 11/11/2024 (MT Newswires) -- EUR/USD remains relatively soft near 1.07, noted ING.

In the background, there is the focus on German parliamentary elections, with the latest reports suggesting a no-confidence vote could be held in December and a snap election as early as February, wrote the bank in a note.

It seems a leap of faith at this stage to expect a complete turnaround in the German fiscal position and instead, the onus will be on the European Central Bank to support the eurozone economy, stated ING.

The bank favors a 50bps ECB rate cut in December compared with the current 28bps that is being priced in by markets.

Two-year EUR:USD swap rate differentials remain exceptionally wide at 170bps in the US dollar's favor and make the case that it will only be position adjustment that generates any EUR/USD strength this week. ING struggles to see that dominating, and instead sees EUR/USD unable to hold gains over 1.0750 before breaking below 1.0670/80 to 1.0600.

Sterling is doing quite well as financial markets continue to only price in a very modest easing cycle and the United Kingdom, by nature of its trade deficit with the United States, may not be front and centre in the looming trade war, added ING.

Away from U.S. politics, the focus in the UK this week will be data and Bank of England speeches, according to ING. Wage and employment data are in focus on Tuesday, while BoE Governor Andrew Bailey makes an important Mansion House speech on Thursday.

Given that the UK economy has been performing quite well and the incoming U.S. Donald Trump's policies could prove inflationary, Governor Bailey may not want to repeat his narrative that UK rates could be cut faster than expected, pointed out the bank.

EUR/GBP is starting to look comfortable below 0.8300. If ING is correct with its ECB call, then 0.8200 is very possible for EUR/GBP before year-end.