06:05 AM EDT, 10/20/2025 (MT Newswires) -- The eurozone calendar is empty until Friday's PMI and EUR/USD moves will primarily depend on market sentiment about the United States credit market, said ING.

What is important to note is that EUR/USD is spot on its short-term fair value (1.167) despite the recent rally, wrote the bank in a note. That is partly because the starting point of a week ago was one of moderate undervaluation, but also because U.S. lending condition concerns go hand in hand with dovish repricing in Federal Reserve expectations.

The EUR/USD two-year swap rate gap tightened sharply to 104bps before re-widening to 110bps after Friday's risk re-rating, stated ING. But it remains some 4bps-5bps tighter than a week ago and 7bps-8bps tighter than the start of October.

The calm on the French political side allowed the euro (EUR) to recover a bit, but it's hard to get too comfortable with France, pointed out the bank. S&P downgraded the country from AA- to A+ in an unscheduled move on Friday, despite a draft budget providing for a deficit reduction having been released.

The decision to freeze the French pension reform complicates budgetary decisions ahead, even if it allows a temporary political reprieve. Budget discussions are set to intensify in the coming days and weeks. Given the fragility of the government, it remains too early to price out the French effect from the euro fully.

But this week the focus should stay on the U.S., and a further souring of credit sentiment could send EUR/USD on a path to 1.180.

ING expects Wednesday's United Kingdom services inflation to undershoot the Bank of England's projection with a 4.6% read, which is also below the 4.8% consensus. That can modestly move the needle to the dovish side in the sterling (GBP) swap curve and weigh on sterling this week.

Incidentally, the bank estimates a steady flow of information about the content of the November U.K. budget in the coming weeks. That appears like a double-edged sword for sterling. Any concerns about fiscal sustainability will hit back-end gilts and spill over into sterling, while higher taxation should dampen growth and raise chances of earlier BoE easing.

ING retains a bullish bias on EUR/GBP and sees risks skewed to 0.88 into the budget event risk.

Outside the macroeconomic and central banks calendar in Central and Eastern Europe (CEE), ING will also be watching a possible meeting between the US and Russian presidents in Budapest, announced last week, which could bring some progress in the Russia-Ukraine conflict and have an impact on the CEE region.

The bank sees Hungary's forint (HUF) and Poland's zloty (PLN) as the biggest potential beneficiaries in a possible market reaction, with the market already confirming this bias on Friday. On top of that, investors are approaching the Czech National Bank's blackout period, and the first interviews are expected this week.

CEE foreign exchange has a good constellation of conditions for further rally, with a potential boost from a Russia-Ukraine ceasefire, added ING. At the same time, EUR/USD has bounced upward, and local rates have stabilized after a rapid rally.

As a consequence, the bank is bullish on the CEE region this week, where hawkish stances from Hungary's central bank (MNB) and CNB could add to the momentum. In detail, however, EUR/PLN has reached the bottom of its usual range, and the room here is limited.

On the other hand, EUR/HUF could return to 388 and EUR/CZK to 24.250, according to ING.