06:08 AM EDT, 10/17/2025 (MT Newswires) -- EUR/USD rose again on Thursday, but primarily on the back of US dollar (USD) weakness, as markets had largely priced in that French Prime Minister Sebastien Lecornu would survive the no-confidence motions, said ING.

PM Lecornu effectively traded political stability for more budgetary difficulties by freezing the pensions reform. This -- aside from very few guarantees on the durability of this new government -- is keeping the 10Y OAT-Bund spread above 75bps, some 10bps wider than mid-August, noted the bank.

That is, however, enough for the euro (EUR) to price out a good portion of the French risk premium, and barring a new government collapse before year-end, this should allow EUR/USD to refocus on canonical market drivers --rates and equities, stated ING.

The US dollar remains in a fragile spot, and a break above 1.750 is surely possible, with 1.180 starting to look very realistic again, pointed out the bank. The upcoming meeting between President Donald Trump and Russian President Vladimir Putin could also attract EUR-positive speculation on a Russia-Ukraine truce.

ING doesn't currently see the Dutch parliamentary election at the end of October as a major risk event for the euro: a fragmented parliament is the most likely outcome, and most parties are unwilling to form a government with Geert Wilders' Eurosceptic PVV party, which is leading in the polls.

The Swedish krona (SEK) is the second-best performer this week, rising even more than the euro as equities sold off on Thursday, noted the bank. This sounds rather odd given SEK's usually high beta -- especially relative to the euro -- to risk assets.

But some hopes for peace in the Russia-Ukraine war ahead of a new Trump-Putin meeting and the sell-off in crude are definitely helping the krona. Swedish investors are generally highly exposed to U.S. equities and this year ING has seen large repatriation flows into Sweden whenever U.S.-specific events hit equities. That naturally implies large SEK buying, according to ING.

The bank remains cautious on the upside ability for SEK beyond this, as souring sentiment in European equities can weigh on the krona on Friday. But the medium-term outlook remains bullish for SEK, and its ability to withstand equity shocks like this one reinforces ING's view.

The EUR/USD rebound brought some positive support for Central and Eastern European (CEE) currencies, while the rates market stabilized somewhat, leaving room for further gains. At the same time, markets may again see a higher chance of an end to the conflict between Ukraine and Russia, which would benefit CEE currencies the most, especially Poland's zloty (PLN) and Hungary's (HUF).

EUR/PLN moved to the lower end of the bank's range of 4.245-275, and ING doesn't see enough strength to break through. On the other hand, EUR/HUF has a good chance of continuing to move down, especially with likely support from the central bank (MNB) next week. As such, markets could test 389 in the coming days.