ECB preview: And so, the hiking begins

We expect the ECB to hike the deposit rate by 25bp to 2.25% on Thursday 11 June in line with consensus and markets.
We expect Lagarde to keep full optionality on the future policy rate path, including a potential summer hike but not pre-committing.
We expect a final 25bp hike in Q3 bringing the deposit rate to 2.50%.

Danske Research Team Danske Bank A/S

We expect the ECB to hike policy rates by 25bp, bringing the deposit rate to 2.25% on June 11 in line with market pricing and consensus. The recent communication from ECB’s GC members have clearly signalled a rate hike in June, both from the hawkish and dovish side of the spectrum. The size and particularly the persistency of the energy shock means that “We can no longer look through this shock. The risk of deanchoring inflation expectations is rising”, according to Schnabel. The main reason for ECB hiking is thereby to keep inflation expectations anchored by signalling a willingness to act.

Since the April meeting, headline inflation has evolved broadly as expected by the ECB while core inflation has surprised on the upside due to a strong services reading in May. Oil futures have moved higher compared to the baseline staff projections in March and we thus expect the new staff projections to increase the 2026 inflation forecast to 2.9% y/y (from: 2.6%) and 2027 to 2.2% y/y (from: 2.0%). Growth data has surprised on the downside both in terms of Q1 GDP and survey-based indicators in Q2, so we expect a downward revision of the 2026 GDP growth to 0.6% y/y (from: 0.9% y/y) and 2027 to 1.2% y/y (from: 1.3%). See chart 2 and next page for more details. As the new staff projections likely assume around 68bp worth of hikes in the technical assumptions, we believe they give the GC arguments for hiking twice this year.

With the June hike fully priced in by markets, all focus during the press conference is on signals. We expect Lagarde to keep full optionality on the future policy rate path, including a potential second summer hike. The well telegraphed policy hike coming next week reveals a preference for curbing upside inflationary risks rather than addressing downside growth risks. As one hike is not significantly changing economic conditions, we expect the ECB to deliver another 25bp hike in Q3. Limited new data will be available by the July meeting, making a firm assessment of potential second round effect difficult, which increases the uncertainty of the exact timing of a potential second hike. We stress that the decision of a hike in July or September does not significantly affect the economic outlook nor our overall view on rates markets where we still favour playing the move for lower short-end swap rates.

Download the full ECB Preview report

Author

Danske Research Team

Danske Bank A/S

Research is part of Danske Bank Markets and operate as Danske Bank's research department. The department monitors financial markets and economic trends of relevance to Danske Bank Markets and its clients.

AUD/USD remains above 0.7200 after China's trade data

AUD/USD sits above 0.7200 in the Asian session on Tuesday, near its highest level since May 14. The US Dollar stays under pressure as a rallying Japanese Yen outweighs support from hawkish Fed bets and geopolitical tensions. This, along with firming expectations for another RBA rate hike later this month, acts as a tailwind for the Aussie. However, mixed China trade balance data keep the pair restricted.

USD/JPY: Heavy near 153.50 as BoJ rate hike bets boost JPY

USD/JPY is sitting at six-month lows near 153.50 in the Asian session on Tuesday, as Japan's upbeat wage growth data and Q2 GDP revision cement bets on a BoJ rate hike next week and continue to boost the Japanese Yen. Meanwhile, US Dollar selling remains unabated despite hawkish Fed expectations and rising geopolitical tensions, lending additional support to the pair.

Gold benefits from weak USD; eyes $4,450 as focus remains on US CPI data

Gold attracts some buyers during the Asian session, snapping a two-day losing streak as the recent US Dollar pullback from a three-week high gains momentum amid the rallying Japanese Yen. However, hawkish US Federal Reserve expectations, along with persistent geopolitical uncertainties, offer some support to the safe-haven buck and cap the non-yielding bullion.

Ripple and Stellar outlook: Hold bullish bias above EMAs as derivatives back upside

Ripple (XRP) and Stellar (XLM) hold above the key support zones on Tuesday, hinting at an upside move. Derivatives metrics further support the recovery, with both altcoins showing positive funding rates and rising long positions. Derivatives data shows a bullish tilt among XRP and XLM traders.

Why Oil is setting up for its most explosive move in years

The biggest Commodity trade of the year may be hiding in plain sight. Gold, Silver, Copper and Agricultural Commodities have already delivered some of the most dramatic repricing events of 2026, rewarding traders who recognized early that scarcity, geopolitical fragmentation and constrained supply were becoming dominant market forces.

Diesel’s record $100 warning: The oil shock hiding in plain sight

The Oil market may look calmer than it did a few months ago, but diesel is sending a very different message. The US diesel crack spread, the premium of ultra-low sulphur diesel futures over WTI, recently surged above $100 per barrel for the first time, reaching an intraday record of just over $102.00.