ECB Review: 50bp and TPI but the hiking cycle is set to be short

Today, the ECB announced its first rate hike in 11 years to fight off inflationary pressure. It hiked the three policy rates by 50bp in a unanimous decision, thereby deviating from its previous guidance of 25bp at the Sintra conference. There will be more rate hikes but the size will be set meeting by meeting and the previous guidance therefor no longer applies.
The ECB also announced a new anti-fragmentation tool, the so-called Transmission Protection Instrument (TPI). Tomorrow's survey of professional forecasts may also show a high inflation expectation justifying the larger move.
The ECB's assessment of growth and inflation outlook was broadly unchanged from June.
We are gloomier on the economic outlook, which ultimately is set to take inflation expectations lower than the ECB conveys. We no longer expect the ECB to hike policy rates in Q1 next year. We expect the ECB to hike by 50bp in September and 25bp in both October and December. We see risks slightly skewed to fewer hikes. That means that we anticipate a cycle hike of 1% on the deposit rate.

Danske Research Team Danske Bank A/S

Download the full 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.

EUR/USD shifts its attention to 1.1900 and above

EUR/USD has shaken off Tuesday’s dip, pushing back beyond the 1.1800 mark amid decent gains as Wednesday’s session draws to a close. The rebound is largely driven by a modest pullback in the US Dollar, as markets digest the aftermath of President Trump’s SOTU speech and continue to monitor trade-related headlines and signals from the White House.

GBP/USD challenges multi-day highs near 1.3530

GBP/USD leaves behind the previous day’s decline and regains fresh upside traction on Wednesday, surpassing the 1.3500 barrier in a context of a modest decline in the Greenback and a generalised improved mood in the risk-linked space. Meanwhile, the US tariff narrative continues to dictate the mood among market participants after Presidet Trump’s SOTU speech failed to surprise markets.

Gold remains bid and close to $5,200

Gold buyers are returning to the fold on Wednesday, targeting the $5,200 area and possibly beyond, after Tuesday’s corrective dip from monthly highs. The rebound in the precious metal comes as the US Dollar loses traction, with Trump’s SOTU speech offering little fresh direction and AI-related nerves continuing to ease.

UK financial watchdog advances stablecoin oversight as four firms pilot issuance

The Financial Conduct Authority (FCA) in the United Kingdom (UK) is advancing toward the final stablecoin regulatory framework with a pilot program involving four companies, including Monee, Financial Technologies ReStabilise, Revolut and VVTX.

Nvidia earnings to influence AI trade and broader market sentiment

For the last three years, Nvidia has been the engine of the AI boom, and now Wall Street is watching to see whether that momentum can keep going. High-growth stocks have been struggling to maintain their bullish trend in 2026.

Cosmos Hub Price Forecast: ATOM rebounds slightly, bearish outlook remains intact

Cosmos Hub (ATOM) price rebounds, trading above $2.05 at the time of writing on Wednesday, after undergoing a sharp correction since last week. Weakening on-chain and derivatives data support a bearish outlook, while technical analysis remains unfavorable.