Home Daily Commentaries ECB expects rate increases to continue

ECB expects rate increases to continue

Tuesday 20 December, 2022

Daily Currency Update

ECB Vice President, Luis de Guindos, says a 50 basis point increase is set to continue, reaffirming last week’s hawkish ECB statement from Christine Lagarde. He added yesterday that continuation of 50bps hikes is expected until inflation is on a clear path back to 2%. Although ECB policymakers delivered a smaller rate increase last week than the previous two meetings, the statement was very optimistic and was enough to drive our strategists to change their rate forecasts from two 25 basis point increases to two 50 basis points in February and March next year.

Key Movers

The US dollar edged down against the euro as upbeat German business morale data supported the common currency, while a modest improvement in investors’ appetite for riskier currencies weighed on the safe-haven dollar. The USD rallied for much of this year on a hawkish Federal Reserve and rising geo-political tensions but has come under pressure in recent weeks as investors bet the central bank may have limited room to keep on with its inflation-fighting interest rate increases.

Expected Ranges

  • GBP/USD: 1.2105 - 1.2295 ▲
  • GBP/EUR: 1.1405 - 1.1465 ▲
  • EUR/USD: 1.0605 - 1.0675 ▲