ING Comments on Euro, Hungary's Forint, Poland's Zloty, Czech Republic's Koruna

06:14 AM EDT, 04/03/2025 (MT Newswires) -- EUR/USD is net around 0.9% higher after the United States trade tariff announcement late Wednesday, said ING.

The bank noted it didn't really buy into the story that the worst is out of the way for Europe now. The main buying point for the euro is that it's a big, liquid alternative to the US dollar -- and that the dollar's troubles from weaker U.S. consumption are greater than the euro's.

ING also thinks that some medium-term factors are in place in that the U.S. wants a weaker US dollar and that some major investor communities, such as foreign exchange reserve managers, will be looking to reduce the US dollar share in their currency portfolio.

Also, a lot of the language in President Donald Trump's executive order is very similar to that used in Stephen Miran's Mar-a-Lago accord paper -- espousing the need for a weaker US dollar in the longer term, wrote the bank in a note.

While a global trade war in theory is euro-negative, the soft underbelly of the U.S. economy is the dominant factor for EUR/USD right now. A much sharper sell-off in U.S. equities, dragging U.S. rates even lower, adds another nail in the coffin of U.S. exceptionalism and could send EUR/USD over 1.10, pointed out ING. Major medium-term resistance sits in the 1.11-1.12 area. It's hard to call a major break of that unless U.S. activity craters.

For the time being, however, the bank predicted EUR/USD to trade off the U.S. equity story, where memories will be stirred of protectionism causing major sell-offs.

Wednesday's announcement of U.S. tariffs set off a full risk-off mode for emerging market currencies and of course the Central and Eastern European (CEE) region cannot avoid the hit, added INH. Given the trade nature of the shock, Hungary's forint (HUF) and Czech Republic's koruna (CZK) should be the main ones exposed given the open nature of the economy.

However, given the dovish shift from Poland's central bank (NBP) and Thursday's press conference, ING believes the zloty (PLN) may underperform the CZK in this environment.

In the rates space, HUF and PLN have more room for dovish pricing in the bank's view, and ING also thinks that ultimately, trade wars for CEE aren't as negative as they first appear. However, in the short term, the negative shock is clear for the entire region.

In Poland, Wednesday's decision by NBP came as no surprise, and rates remained unchanged at 5.75%. However, the statement suggested that sentiment within the council is shifting in a dovish direction and the NBP now sees the possibility of lower inflation than previously expected, noted the bank.

In addition, given the weaker economic numbers, ING believes that hawkish rhetoric shouldn't affect the markets too much.

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