Euro to Slide if ECB Fails to Signal 50 Basis Point Rate Hike on Table
Investing.com
Published Jun 08, 2022 23:32
By Yasin Ebrahim
Investing.com -- The European Central Bank is unlikely to spring a policy surprise when it delivers its monetary policy decision on Thursday, but the central bank will have to be bold in its tone on rate hikes or risk the euro resuming its slide.
EUR/USD rose 0.14% to $1.0715.
“Any message that does not signal an openness to a 50bp hike would likely fall short of the market’s hawkish expectations and push EUR/USD closer to 1.0500,” ING said in a note.
The prospect of a 50 basis point rate hike has gathered steam in recent weeks following data showing that inflation hit a record high in May.
In recent weeks, more hawkish ECB members have become more vocal for the need for aggressive rate hikes.
Robert Holzmann, the Austrian central bank governor, said a 50 basis point rate hike was needed to send a “clear signal that the ECB is serious about fighting inflation”.
But if ECB President Christine Lagarde sticks to her previous stance for 25 basis points rake hikes in July and September that will likely push the central bank further behind the curve on tackling inflation and prompt bets for steeper rate hikes later this year and in 2023.
Markets are currently betting on a total of 130 basis points of tightening by year-end, which "would imply a 50bp hike at one of the four remaining meetings - after the June one," ING added.
Get The App
Written By: Investing.com
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.