The European Central Bank (ECB) announces its rate decision today. Economists at ING analyze how the policy announcement could impact the EUR/USD pair.
Outside risk to 1.0980/1.0990 should ECB pushback against easing expectations prove surprisingly effective
ECB President Christine Lagarde will try to avoid being drawn into any pre-commitment over a summer rate cut. In theory then, if she can avoid this and leave markets with a sense that the ECB is truly data-dependent, short-term Euro interest rates could nudge a little higher and support FX pairs like EUR/USD and EUR/CHF.
We would say that the ECB event risk proves a mild upside risk to EUR/USD – but the carpet could be pulled from under the Euro should President Lagarde somehow convey the message that the policy rate will be getting cut in the summer after all.
1.0850-1.0950 looks the EUR/USD range, with outside risk to 1.0980/1.0990 should the ECB pushback against easing expectations prove surprisingly effective.
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