ECB: Moving toward a more hawkish stance – Danske Bank
|Analysts at Danske Bank revised their forecast for the European Central Bank and now look for a rate hike in September and December. Despite the more hawkish stance from the ECB, they still forecast EUR/USD at 1.05 in twelve months.
Key Quotes:
“We revise our ECB call slightly after the recent Governing Council (GC) comments, hawkish minutes and inflation surprises. We now look for a 25bp rate hike in both September and December 2022. Beyond that, we do not look for a prolonged hiking cycle into 2023 at the current stage as inflation falls back to target and Fed tightening will also have contributed to a significant tightening of financing conditions globally – thereby worsening the economic outlook.”
“While we expect the statement to re-confirm the decisions taken at the March meeting just 4 weeks ago, with its guidance to end APP during Q3 and the first hike to come 'some time' after the end of net asset purchases, we believe the press conference will be the most interesting part, where we expect Lagarde to repeat the gradual, flexibility and optionality mantra. While we do not expect Lagarde to directly mention a September rate hike as a possibility, similar to other voices in the GC, we believe she will keep the door open as a way to respond to high inflation pressures.”
“It seems likely that ECB is moving towards a more hawkish stance. For EUR/USD, if this is indeed confirmed at the upcoming meeting then we may see some upside risk to spot on the day. However, looking beyond the event of the ECB meeting itself, downside risk to EUR/USD spot will likely persist as spreads widen further in Europe (vs. Germany) and the economy continues its slowdown. (…) We continue to forecast 1.05 in 12M.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.