06:20 AM EST, 11/05/2024 (MT Newswires) -- EUR/USD is just about holding onto gains made over the last few days, said ING.

According to ING, these gains have been delivered on the back of, i) some European Central Bank pushback against a 50bps cut in December, ii) Friday's soft United States jobs report and iii) Monday's poll result in Iowa that suggested Democratic presidential candidate Kamala Harris might perform better than expected in Tuesday's election

The foreign exchange options market is primed for a big move in EUR/USD, wrote the bank in a note. Assuming that a clear election result emerges this week, ING is primed to deliver new multi-quarter EUR/USD forecasts -- having kept a multi-quarter profile from Q4 onwards flat at 1.10 from April this year.

Donald Trump's threat of protectionism has sharpened the senses in European political circles and may be hurrying German political leaders to compromise on the budget side, stated ING. However, for this week, expect the fallout from the U.S. elections to dominate.

Ultimately, a Trump win without the House could be the worst scenario for EUR/USD by late 2025, where global growth would be finding no insulation from U.S. tax cuts and the ECB might be forced to cut rates deeper into accommodative territory, pointed out the bank.

It's after the European close Tuesday, but ING will see whether the ECB's Isabel Schabel again pushes back against a 50bps cut in December. Currently the market prices 29bps of cuts.

Inflation in Turkey surprised slightly to the upside Monday, coming in at 2.9% month-over-month versus the 2.5% expected. Although the year-on-year reading continues to fall further, slower disinflation may again weigh on the Central Bank of Turkey's caution in the timing of the first rate cut.

ING still estimates a first cut in December but Friday's inflation report and the governor's presentation could tell investors more.

The lira (TRY) remains unchanged and the U.S. election doesn't seem to change the set trajectory either, added the bank. Market pricing of rate cuts is gradually shifting from this year to next year. Although the market reacted little to the higher inflation number, investors will likely see more repricing later.

Despite further upside surprises in inflation and the postponement of the first-rate cut, it is clear that investors are approaching a period where rate cuts will be on the table, according to ING.

Although the U.S. election shouldn't affect the TRY market, the bank believes it's safer to be in the spot market for carry collection in foreign exchange, while forwards may prove more volatile in current conditions.