06:12 AM EDT, 05/28/2025 (MT Newswires) -- The euro has held up better than most G10 currencies, helped by positive headlines about European Union-United States trade negotiations, said ING.

On the data front, France posted a negative month-on-month consumer price inex print for May, which adds to the narrative of an initial deflationary impact from tariffs on the EU, wrote the bank in a note. If Friday's data from other member states confirms this trend, EUR swaps could start to price in a greater chance of European Central Bank rates dipping below 1.75%.

On Wednesday, the ECB publishes its CPI expectation surveys for April.

Interestingly, the Swedish krona (SEK) has started the week on the softer side against the euro, stated ING. Normally, SEK acts as a higher-beta version of the euro and would have outperformed on positive EU news in other conditions.

However, the krona appears to have decoupled from the usual global risk sentiment drivers, moving instead in near-perfect asymmetry with the US dollar, pointed out the bank. Last week, U.S. Treasury concerns coincided with a 1% drop in EUR/SEK. One reason may be that SEK has been supported by equity repatriation from the U.S., with negative U.S. news accelerating these flows.

EUR/USD has found support around 1.130 on several occasions over the past six weeks. If U.S. data and President Donald Trump continue to deliver positive surprises this week, a decisive break lower is possible, added ING.

Still, the bank doubts markets are ready to price out the USD risk premium, especially with deficit concerns recently coming to the fore. For now, ING sees 1.130 as a likely anchor, with upside risks for EUR/USD still dominant in the weeks ahead.

Tuesday's meeting at Hungary's central bank (MNB) didn't bring much news, with rates unchanged at 6.50%. MNB confirmed a hawkish tone with a focus on inflation expectations and service prices. What is new is commentary on bank liquidity in Hungary, where a large number of lending facilities from previous years are expiring this year, tightening market conditions, noted ING.

From a market perspective, the hawkish MNB is positive for the forint (HUF). Although the bank maintains a more bearish view on foreign exchange in the medium term, ING may see further gains in the short term.

The global story and higher EUR/USD generally support a stronger HUF, and the hawkish MNB pushes market rates higher in an environment where core rates rally. As a result, at the end of Tuesday's trading session, the two-year spread moved close to its widest since mid-April. EUR/HUF should so have an easy path to 402.

Wednesday in the region, the calendar is empty, but similarly for HUF, global conditions for Central and Eastern European currencies remain positive and ING may see some slow gains in Poland's zloty (PLN) and the Czech Republic's koruna (CZK) as well.