ECB Preview: Three scenarios and their implications for EUR/USD – TDS

FXStreet Insights Team FXStreet

Economists at TD Securities discuss the European Central Bank (ECB) interest rate decision and their implications for the EUR/USD pair.

Hawkish (10%)

The GC delivers another 25 bps hike but the statement strikes a more hawkish tone than in May. Lagarde removes any doubts about GC's hawkish shift and stresses a high likelihood that rates will be raised at least 2x more due to elevated inflation persistence. EUR/USD +0.65%.

Base Case (60%)

The GC hikes by 25 bps and keeps language around future hikes unchanged. Similar to in May, Lagarde remains noncommittal in language around future hikes but suggests that risks are skewed to further tightening. EUR/USD -0.15%.

Dovish (30%)

25 bps hike, but statement strikes a more dovish tone than in May. Lagarde more cautious than in May and signals at most one more hike in this tightening cycle. EUR/USD -0.50%.

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

AUD/USD sticks to neutral bias above 0.7100 amid cautious markets

AUD/USD holds steady above 0.7100 in the Asian session on Monday as the US Dollar stalls its modest pullback from the highest level since late July amid persistent geopolitical uncertainties. The PBOC status quo on Loan Prime Rates also weighs on the Aussie. However, bets on another RBA rate hike continue to underpin the Australian Dollar ahead of the Trump-Xi Summit.

USD/JPY eases below 157.00 amid looming intervention risks

USD/JPY is easing back below 157.00 in Asia on Monday, undermined by modest Japanese Yen strength amid looming intervention risks after Friday's BoJ rate check. A Japanese holiday also keeps traders on edge amid escalating geopolitical tensions between Russia and Ukraine and in the Middle East. As a result, the US Dollar pauses its pullback, limiting the pair's downside.

Gold meets resistance around $4,400

Gold kicks in the new trading with on the back foot, keeping its trade near $4,350 per troy ounce. The precious metal’s correction comes on the back of the firmer US Dollar and espite declining US Treasury yields across the curve.

Bitcoin hits $85,000 for the first time in eight months

Bitcoin price reclaims $85,000 on Monday, advancing last week’s 5% recovery toward an eight-month high. The recovery in King Crypto aligns with renewed institutional demand, with Exchange Traded Funds (ETFs) recording $433 million in inflows on Friday.

The week ahead: Fuel prices in focus as we lead up to key eco releases

Financial markets are in a strange position as we move to the final weeks of Q3, uncertainty and volatility continue to grip markets, but the oil price is falling; and European and US stocks are poised to open higher later on Monday. Market stresses are concentrated in sovereign bonds, and European and US yields had another scare late on Friday, and moved higher.

BoJ Recap: Not as hawkish as expected

The Bank of Japan (BoJ) raised its short-term interest-rate target to 1.25% from 1.00% in a 7-2 vote, marking another step in the normalisation of monetary policy and widely matching what everyone has been expecting for weeks.