EUR/USD: Risk sentiment could slow down the euro even if the ECB rises 50 basis points – ING

The ECB is facing a very difficult decision today, in which market conditions interfere with its plans for a 50 basis point increase. What impact will it have on the euro? The economists of ENG They look at how the common currency might react to the interest rate decision.

The ECB will have a hard time threading the needle

“Although our forecast is for a 50 basis point rise, we would not be surprised if the ECB remains unchanged today.. A 25 basis point move seems the least likely scenario.”

“If the ECB’s 50 basis point hike comes in an environment where markets are easing concerns about the banking sector thanks to support from the SNB, this could be interpreted as a sign of confidence from Frankfurt about the health of the eurozone banking system and could ultimately boost the euro.

“Should the ECB force a hike in a still fragile environment for the European banking sector, the impact on EUR/USD could be really negative.since investors see it as another important risk for the financial stability of the zone, while the simple revaluation of ECB rate expectations is not statistically enough to boost the Euro.”