06:15 AM EDT, 10/23/2024 (MT Newswires) -- EUR/USD briefly fell below 1.0800 overnight on Tuesday, ING said, adding that it could see the pair stabilize around current levels for a bit longer, but the chances of a sustainable rebound remain slim as the USD:EUR two-year swap rate gap is now at its widest since May -- 145bps -- and it's hard to pinpoint any clear driver for a retightening in the near term.

One of the reasons that the gap will stay wide is that European Central Bank speakers have followed a rather dovish script in post-meeting commentary, stated ING. Even the most hawkish members like Austria's Robert Holzmann decided not to push back against market pricing for back-to-back ECB cuts into mid-2025, and President Christine Lagarde reiterated her generally dovish tone on a TV interview Tuesday.

Wednesday, the eurozone calendar includes consumer confidence figures for October and a bunch of other ECB speakers -- including Lagarde again and Chief Economist Philip Lane. The policy communication however appears quite clear, and markets may start to overlook some of those comments, wrote the bank in a note.

If PMI fails to surprisingly rebound, the ECB should keep cutting, and euro (EUR) short-term swap rates will still remain capped. The bank's call remains for EUR/USD at 1.07 before November's United States presidential election.

Elsewhere in Europe, ING continues to see downside risks for sterling ahead of speeches by Bank of England Governor Andrew Bailey on Wednesday, Thursday and Saturday, as well as some potential risk premium being built before the United Kingdom Budget announcement next week. Cable can still move to 1.28 by month-end.

Tuesday's policy meeting at Hungary's central bank (MNB) brought no change in rates (6.50%), as expected, added ING. The central bank accompanied this with hawkish comments but tried to avoid commenting on rate hikes that circulated in the question-and-answer session.

MNB seems to have done as much as possible while avoiding extreme scenarios in the current environment. Markets also see this and have taken hawkish guidance with a test of 400 EUR/HUF again but the 400-402 range seems to be here to stay, pointed out the bank.

After the MNB meeting, focus shifts back to the global story and the forint (HUF) isn't under central bank control. At the same time, EUR/HUF is a key variable for the length of the pause in the cutting cycle and a possible return to the rate cuts discussion.

"Paradoxically," it will now depend mainly on the outcome of the U.S. election. ING sees HUF as the most exposed currency within the Central and Eastern European region in case of a Donald Trump victory, while relief in case of a Kamala Harris victory would be more visible in Poland's zloty (PLN) and the Czech Republic's (CZK).

As such, MNB will face a challenging following weeks. Overall, HUF may have found some new range, but it isn't out of the woods yet and the coming weeks don't suggest calming. HUF recovery will so take more time and will mainly depend on the global story, according to the bank.