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

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The economists of TD Securities discuss the European Central Bank (ECB) interest rate decision and its implications for the EUR/USD pair.

Base assumption (65%): Aggressive line, 50 basis points

“Basic policies will see copy/paste of the December decision. We expect the tone of the press conference to be relatively aggressive. It is President Lagarde likely to repeat that 50 basis point hikes are on the table for March and possibly May. Although prices have risen this week, it is possible that President Lagarde will continue to encourage the EUR higher from now on. EUR/USD +0.20%“.

Moderate attitude (35%): 50 basis points but with change of orientation

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“Basic policies will see copy/paste of the December decision. The president Lagarde backs off from committing to a series of 50 basis point hikes. He says that the decline in headline inflation in recent months means that an additional 50 basis point rise is possible in March, but it is not clear that it will be necessary then or afterwards. EUR/USD -1.00%“.

Source: Fx Street

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