ECB: A 75 bps hike will not be a game-changer for EUR/USD – ING

FXStreet Insights Team FXStreet

Economists at ING expect the European Central Bank (ECB) to hike by 75 bps at the October meeting. Nonetheless, the hike should fail to offer substantial and long-lasting support to the euro, according to economists at ING.

Hawks can’t lend their wings to the euro

“We see limited upside risks for EUR/USD in the aftermath of the ECB announcement. This is mainly due to the weakened correlation between short-term rates and currency dynamics in the eurozone. This means that additional tightening being priced into the EUR curve on the back of a hawkish statement still looks unlikely to offer a sizeable, and above all, sustainable support to the euro.”

“In line with our expectations of a stronger dollar, as the Fed keeps tightening policy and keeps risk sentiment weak into the new year, we expect a drop below 0.9500 in EUR/USD by the end of this quarter.”

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