EUR/USD: The risks for the euro point to the downside – Commerzbank

The highlight today will be the European Central Bank (ECB) meeting. In the view of economists at Commerzbank, the euro is unlikely to strengthen even if the central bank delivers a 75 basis points rate hike.

A 50 bps step would be disappointing for the market

“A 50 bps step would be disappointing for the market, above all if the ECB also sounds cautious as far as future steps are concerned. The ECB cannot realistically deliver more than the market has priced in already, i.e. a 75 bps step. So even if it fulfills market expectations the euro would unlikely benefit further from the decision.”

If the ECB were to have converted into a decisive adversary of inflation after all and hike by 75 bps while also sounding restrictive, thus surprising the market, the euro would jump above parity quite quickly. However, the likelihood of that happening is quite small.”

See – ECB Preview: Forecasts from 12 major banks, even 75 bps is too little to lift the euro