ECB Preview: Three scenarios and their implications for EUR/USD – TDS
|Economists at TD Securities discuss the European Central Bank (ECB) Interest Rate Decision and their implications for the EUR/USD pair.
Hawkish (25%)
The GC delivers a well-expected hold but makes a slight hawkish shift in language. In particular, the GC emphasizes that geopolitical instability could warrant further hikes if the subsequent inflation shock is large enough to feed through persistently into inflation expectations. EUR/USD +0.45%.
Base Case (65%)
The GC delivers a well-expected hold and keeps language roughly unchanged relative to September. As such, while the GC does not close the door to further hikes, it essentially implies that they are highly unlikely. EUR/USD -0.10%.
Dovish (10%)
The GC delivers a well-expected hold and explicitly states that the end of the tightening cycle has most likely been reached. EUR/USD -0.30%.
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