06:07 AM EDT, 03/13/2025 (MT Newswires) -- After inching back below 1.090, the next move higher for the euro may need to wait for Russia to officially agree on the 30-day truce with Ukraine, said ING.

Still, that may not be a major or long-lasting bullish driver for the euro, as a peace deal is already largely in the price, and the terms of the truce would need to be weighed against longer-term implications for Ukraine and the European Union, wrote the bank in a note.

On the macro side, ING will look at industrial production figures for January in the eurozone on Thursday, which shouldn't move markets. There is also some interest in tracking European Central Bank members' remarks following last week's cut.

Wednesday, European Central Bank President Christine Lagarde said that global trade events will make it "impossible" for the ECB to constantly guarantee 2% inflation. That probably opens the question of whether an overhaul of the ECB's inflation target is due: in practice, this is already being interpreted in a rather flexible way, and only plans of a fiscal boost in Germany have averted rates to be cut to or below 2%, in the bank's view.

Markets remain on the lookout for an official multi-party agreement on defense and infrastructure spending in Germany. A couple of days ago, the Green party said it expected a deal with Prime Minister-to-be Friedrich Merz by the end of the week. Once that is announced, markets could see a tick higher in the euro, although markets are already almost fully pricing it in, stated ING.

The bank's view for the remainder of March remains that a decline to 1.080 is more likely than another rally to 1.10 in EUR/USD.

ING has published a note on the potential reset in United Kingdom-EU relationships and implications for British finances. The conclusion is that while rejoining the single market -- or tightening economic ties -- would have a beneficial growth effect, that is unlikely to unlock much fiscal headroom. That's because the Office of Budget Responsibility's projection adjustment would likely be spread over multiple years.

The bank still looks with some concern at the upcoming March 26 Budget event in the U.K., which runs the risk of unnerving a gilt market already hit by EU-bond spillover. ING sees downside risks for sterling ahead of the risk event.

Before then, the U.K. releases gross domestic product figures for January on Friday and jobs numbers for February next Thursday, a few hours before the Bank of England rate announcement. That should be a hold -- markets pricing in only a 5% chance of a cut -- but given expectations for a cut either in May or June, some sort of dovish indication will be required to maintain current pricing in the Sonia curve.

Anyway, ING retains a bearish bias on GBP/USD, although near-term noise linked to the United States macro outlook might still bring the pair temporarily above 1.300.

As expected, Poland's central bank (NBP) left rates unchanged at 5.75% on Wednesday, however the new forecast is interesting, pointed out ING. This year's outlook has been upgraded from the November version in gross domestic product and downgraded in inflation. But the outlook for next year goes in the opposite direction of higher inflation, and the target won't be reached until 2027, added ING.

The NBP staff are clearly looking at the situation from the hawkish side. As a consequence, ING believes Thursday's press conference will be hawkish as well, with an emphasis on higher core inflation, wage pressures, a tight labor market and economic recovery. At the same time, global events may also support the governor's hawkish tone with the promise of fiscal expansion in Germany as a new development since the last meeting.

The bank sees a chance for a repricing up in rates, which are on the dovish side compared with the January and February meetings. Although markets are pricing in about 75bps of cuts for this year, similar to ING's expectations, markets see the first cut in July, the bank estimates a cut in September, and are pricing in another 75bps reduction next year.

So, some hawkish repricing will be supportive for the zloty (PLN), which has seen some correction in the last two weeks. EUR/PLN could, as such, head back closer to 4.160 again, according to the bank.