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%.

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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.

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