EUR/USD: Energy outlook points to fading rallies, eying a 0.96 level in Q4 – TDS

The European Central Bank (ECB) meeting could lift the euro if rates are hiked by 75 bps. However, the move is set to be short-lived and economists at TD Securities look to fade rallies, eyeing the 0.96 level.

EUR risks skew to a larger selloff on a dovish outcome

“The outcome is near a coin toss, but ultimately we sit (just) on the 50 bps hike side for September's decision. Both outcomes are likely to share the same broad narrative and end-point; the question is more about a strategy of 75/50/25 vs 50/50/50 hikes for the rest of 2022's policy decisions.”

“EUR risks skew to a larger selloff on a dovish outcome. Markets are pricing in around 65 bps for the meeting, so a 75 bps hike could mildly support EUR in the short-term. Still, the energy outlook is key and points to fading EUR/USD rallies, eying a 0.96 level in Q4.”

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