06:04 AM EST, 01/23/2025 (MT Newswires) -- This week's EUR/USD bounce has been muted so far, said ING.

There is no way investors can expect to hear an 'all-clear' signal on United States tariffs, wrote the bank in a note to clients. Keeping trading partners off balance/guessing is a tactic that kept the US dollar (USD) reasonably well bid during United States President Donald Trump's last tariff regime in 2018-19.

Another reason traders may not want to reduce their euro short positions is ahead of Friday's release of the eurozone flash PMI for January, pointed out ING. Another dire set of confidence readings will only encourage the European Central Bank to look through the tick-up in inflation and commit to an over 100bps easing cycle this year.

EUR/USD might explore the lower end of a 1.0350-1.0450 range on Thursday should Trump have something more to say about tariffs, stated the bank. However, the next big move may not emerge until the FOMC meeting next Wednesday, the U.S. December core PCE deflator next Friday and that seemingly Feb. 1 tariff deadline.

Turkey's central bank (CBT) is scheduled to meet on Thursday, the first time since the start of the cutting cycle in December. ING expects the CBT to continue cutting rates by another 250bps to 45% in line with the market consensus, given recent positive signals on the inflation outlook that are likely to further raise the level of real interest rates and lead to tighter financial conditions if the central bank doesn't act.

The bank anticipates that the forward guidance will stay consistent on Thursday, indicating a cautious and data-driven strategy for future rate cuts. The statement is expected to highlight a decrease in the underlying trend of monthly inflation in December, while also noting a temporary increase in January to manage inflation expectations and signal prudence.

In foreign exchange, the cutting cycle's start in December brought higher USD/TRY volatility but mainly to the downside with the CBT's hawkish messages and narrower rate corridor, added ING. Since the beginning of the year, the lira (TRY) has resumed its trend of nominal depreciation.

TRY continues to outperform other emerging market currencies and remains the bank's favorite carry trade for this year.