06:03 AM EDT, 09/08/2025 (MT Newswires) -- EUR/USD has been unable to hold on to Friday's nonfarm payrolls-inspired gains, said ING.

Holding the euro (EUR) back is no doubt French politics, where Prime Minister Francois Bayrou on Monday holds a vote of confidence in his planned 2026 budget, wrote the bank in a note.

It looks like very few of the opposition parties have plans to tackle France's over 5% gross domestic product budget deficit and would prefer to bring down the government, stated ING. The outcome of such a vote could be President Emmanuel Macron asking Bayrou to stay on, Macron selecting a new technocrat PM, or Macron calling early elections.

The bank sees the risk of the French-German government bond spread moving through 80bps here -- but ING isn't looking for a eurozone-wide period of stress. Italy and Spain have been enjoying sovereign upgrades recently, and the European Central Bank has its Transmission Protection Instrument (TPI) if things really get out of hand.

In short, the bank tends to see this as a localized French issue -- where a potential sovereign downgrade from Fitch (currently AA-, negative outlook) this Friday won't help either.

More volatility in a 1.1650-1.1750 range looks likely for EUR/USD this week, and the bank doubts Thursday's ECB meeting will be a big market mover.

Sterling (GBP)is holding steady, pointed out ING. The enforced cabinet reshuffle by United Kingdom Prime Minister Keir Starmer on Friday didn't touch Finance Minister Rachel Reeves, who is valued for her market credibility.

Softer United States data has seen last week's global bond market sell-off abate -- yet Gilts remain the weak link for sterling, accoridng to the bank. There's no U.K. data of note this week and few Bank of England speakers.

ING suspects EUR/GBP can trade in a 0.8650-0.8700 range this week, given that next week's Bank of England meeting and news on quantitative tightening (QT) plans will be far more interesting.

On Friday after the close of trading, Fitch downgraded Poland's sovereign rating outlook (A-) from stable to negative, which is likely to come as a surprise to markets, noted the bank. This comes after a surprisingly high fiscal policy deficit in the draft budget for next year.

Given Friday's surprising decision, the bank is likely to see some pressure on bonds and currency on Monday. Even before the rating agency's decision, ING expected some ASW widening given the almost muted reaction after the presentation of next year's budget.

The deterioration in the outlook is likely to increase market focus on budget figures, added ING. Based on the rate differential, EUR/PLN should be trading in a 4.260-270 range after last week's Polish central bank meeting. The rating action could help EUR/PLN move closer to 4.270.