06:56 AM EDT, 09/04/2025 (MT Newswires) -- ING said it remains of the view that EUR/USD is set for a return above 1.170.

Markets might not go too aggressive on a Federal Reserve dovish repricing -- unless United States jobs figures are particularly bad -- but there is already enough in short-term rate differentials to justify a higher EUR/USD, wrote the bank in a note.

ING expects a hold next week at the European Central Bank, in line with consensus and pricing, but still thinks the chances of another rate cut later this year are underestimated by markets. ING's Fed call is also more dovish than markets -- and given the much larger room for dovish rerating in the US dollar (USD) OIS curve relative to the euro (EUR) one - and the bank's call remains moderately bullish on EUR/USD for the coming months.

Sterling (GBP) has rebounded in line with ING's call as gilts bounced back after Tuesday's headline-grabbing slump, which was entirely in line with global bond moves.

On Wednesday, Bank of England Governor Andrew Bailey confirmed the more cautious MPC stance on further rate cuts. With the United Kingdom Fall Budget event now set for Nov. 26, markets have trimmed down chances of a cut at the Nov. 6 meeting even further to 5bps, but have slightly increased those for a December cut (13bps), added ING. That follows the rationale that the announcement of growth and inflation-dampening tax rises can tilt the balance back to the dovish side for the MPC.

The bank still believes the BoE will cut before year-end, and while it thought Wednesday's GBP drop was overdone, the coming months will likely see multiple headlines and speculation about the content of the Budget, with elevated risks of adverse spillover into gilts and sterling.

As markets may not feel comfortable completely wiping out December cut bets due to the Budget impact itself, sterling may not count on much more support from front-end rates.

Even if that may not play out in the next few days just yet, EUR/GBP remains more likely to trade 0.870 or above rather than below 0.860 into the November Budget event, it pointed out.

ING remains hawkish and bullish on the Czech Republic's koruna (CZK). EUR/CZK returned close to 24.400 on Wednesday. Although rates still don't point to these levels and it may again be only temporary, the bank believes the direction is correct.

Poland's central bank (NBP) cut rates by 25bps to 4.75% as expected on Wednesday, and the statement was cautious, also in line with ING's expectations. This suggests that Thursday's press conference will likely be hawkish, with an emphasis on fiscal policy and wages.

As a consequence, ING likes payers at the short end of the curve and remains bullish on the zloty (PLN). EUR/PLN touched 4.250, but the bank still believes there is room to go lower if hawkish expectations are met.