06:15 AM EDT, 10/21/2024 (MT Newswires) -- EUR/USD is licking its wounds after a tough week, said ING.

According to the bank, the two key drivers have been: a) the market's repricing of a potential United States presidential candidate Donald Trump victory presaging a potentially tariff-inflicted period for world trade, and b) European Central Bank President Christine Lagarde throwing more fuel on the dovish bonfire with her press conference last Thursday.

With two-year EUR:USD swap differentials now very wide at 141bps and weighing on EUR/USD, there will be much focus on the ECB speakers in Washington DC this week. Here, the bank picks out Lagrade speaking to Bloomberg TV on Tuesday and ECB Chief Economist Philip Lane speaking on Wednesday.

Thursday's release of PMIs across the eurozone region will also be crucial to EUR/USD this week, pointed out the bank. Lagarde surprised some last Thursday by elevating the importance of the PMIs in ECB decision-making. Unless there is a "miraculous" recovery in these -- which seems unlikely -- EUR/USD should stay relatively offered in a 1.08-1.09 range.

ING noted it had a bullish view on EUR/GBP this year, largely because it had felt that financial markets were mispricing the Bank of England cycle. The bank still believes that to be the case, but the problem is that the ECB cycle has moved substantially to the downside too as the ECB has proved more dovish than ING was expecting.

For this week, investors have four speeches from BoE Governor Andrew Bailey. The bank still thinks markets are under-pricing the pace of the BoE easing cycle -- and should Bailey add to some of his rare comments that the BoE could become more 'activist' in its easing, sterling (GBP) could come under pressure.

That may more be felt against the US dollar (USD) than the euro (EUR), with the 1.30 level looking vulnerable for GBP/USD. Thursday's release of the United Kingdom PMI should also have a big say on whether sterling continues to out-perform or perhaps succumbs to some dovish BoE rhetoric, added ING.

The policy rate meeting at Hungary's central bank is scheduled for Tuesday. A rate cut isn't on the table given the EUR/HUF level and market volatility, pointed out ING.

The main question is how long the pause in the cutting cycle will be. The bank expects another rate cut in December -- however, markets are moving in a hawkish direction further out.