EUR/USD: Only a 75 bps hike by ECB and hawkish surprise from QT discussions will drive a large reaction – ING
EUR/USD came within a touching distance of 1.0700 late Wednesday. Economists at ING analyze how the pair could react to the European Central Bank (ECB) policy announcements.
ECB may surprise on hawkish side
“Markets are currently pricing in 54 bps of tightening, but are probably expecting some hawkish signals on quantitative tightening and in the new staff projections. That said, there is still little evidence that the ECB policy is a key driver of EUR/USD. We, therefore, think only a 75 bps hike or the explicit announcement that QT will start at a specific date in early 2023 will be able to drive a large EUR reaction.”
“Our base-case scenario is that EUR/USD ends today’s sessions around the 1.0600-1.0650 area today. This could signal that the Dollar’s bear trend may have indeed halted for now, and favour a return to 1.0500 in the near term.”
See – ECB Preview: Forecasts from 16 major banks, a hawkish surprise?
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FXStreet Insights Team
FXStreet
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