06:11 AM EST, 11/03/2025 (MT Newswires) -- Traded volatility levels from the foreign exchange option market can signal whether investors are actively taking a view or passively folding their cards on existing positions, said ING.

Three-month traded EUR/USD volatility continues to sink and is now below 6%, wrote the bank in a note. It's hard to see what will stop this from falling to the summer 2024 lows of 5.30%.

Combined with the three-month EUR/USD risk reversal dropping back to flat -- from a 1% skew for EUR/USD calls in May -- is a sign that EUR/USD bulls have just about given up, stated INH. Market consensus is for 1.18 by year-end.

The bank thinks EUR/USD could rally slightly more than that on a dovish Federal Reserve -- but those views are under pressure.

ING expects the US dollar (USD) story to continue driving EUR/USD this week. However, in the eurozone, there are a heavy slate of European Central Bank speakers. This starts with Chief Economist Philip Lane later on Monday. ECB rhetoric looks unlikely to help EUR/USD, however.

The debate leans more towards whether eurozone inflation undershoots and the ECB requires another rate cut.

ING suspects that 1.1500 could prove the bottom of the EUR/USD range this week, though that will require some softer United States jobs data to provide some breathing space.

Financial markets are getting excited about a Bank of England rate cut potentially as early as this Thursday. A couple of big investment houses have recently switched their call to a move this week. From just a 6% probability of a rate cut this week, which was priced at the start of October, markets now attach a 29% weight, according to the bank.

ING thinks the Bank of England will prefer to wait for the contents of the Fall Budget later this month before making its next move. With the United Kingdom terminal rate already priced at 3.25% for next summer, the bank finds it difficult to justify a much lower pound on the back of an under-priced BoE easing cycle.

EUR/GBP could come a little lower this week if the BoE retains some of the hawkishness discovered this summer. But the bank suspects buying interest returns in the 0.8730/50 area.

Markets saw some weakness in the Polish zloty (PLN) emerge on Friday following Poland's lower-than-expected inflation reading, and the reaction here seems justified, added ING. Markets are pricing in around 3.60% as the terminal rate, which seems like the current low for the story, and the risk seems more on the hawkish side if anything. EUR/PLN seems to be returning to the previous range of 4.240-270.

The Czech koruna (CZK) is still flat, but Friday's spike in market rates suggests some room for gains ahead of Thursday's central bank (CNB) meeting below 24.300 EUR/CZK, noted ING. On the other hand, the CNB is more balanced these days, and rate hike bets may see some cooling, with a negative impact on foreign exchange.