06:10 AM EST, 01/24/2025 (MT Newswires) -- European Central Bank President Christine Lagarde delivers remarks in Davos on Friday after having reiterated the guidance for gradual cuts earlier this week, said ING.

That echoed what the bank has heard from other ECB members -- even the more hawkish ones -- and next week's expected rate cut should be accompanied by a similar message that may just leave the market unfazed.

EUR/USD has received another small boost from United States President Donal Trump's seemingly benign comments on China tariffs, stated ING. The risk premium -- in other words, short-term undervaluation -- in EUR/USD has been halved from 3% to 1.5% since Jan. 9.

The bank isn't convinced that the gap will be entirely closed given lingering uncertainty about Trump's trade hostility against the European Union.

In line with expectations, Turkey's central bank cut rates again by 250bps to 45% on Thursday. As expected, the post-meeting statement suggests further rate cuts supported by disinflation, pointed out ING.

While inflationary risks persist in the near term, relatively high real rates and recent tightening in loan growth caps should keep disinflation from continuing. ING expects 25.5% inflation and a 27.5% policy rate at the end of 2025 with risks skewed to the upside.

USD/TRY remained essentially unchanged leaving investors with a fat carry, however, the bank estimated the lira (TRY) to return to its usual trajectory of managed nominal depreciation after two days of stability.

The Central and Eastern European region continued its swift rally on Thursday with Poland's zloty (PLN) leading gains, added the bank. EUR/PLN touched 4.210 on Thursday, a new low, and it looks like momentum may lead to a test of 4.200 soon.

Although valuations are pointing to significantly higher levels, the narrative and market positioning support a stronger PLN, according to the bank. As such, after breaking key 4.250 levels, ING sees EUR/PLN gapping down with short positions closing and flipping into new longs.

IN addition, the hawkish tone from Poland's central bank (NBP) supports a stronger PLN, ING doesn't see a similar mood in the rates market. The bank believes another EUR/PLN move down to 4.200 would lead to profit-taking after such a big move in a short period and markets should see stabilization higher.