Home Daily Commentaries European Central Bank in two minds ahead of the next rate policy meeting

European Central Bank in two minds ahead of the next rate policy meeting

Daily Currency Update

The European Central Bank will neither raise interest rates too far nor stop lifting them too early, according to economists who see borrowing costs in the Eurozone peaking in July.

Following the priced in 25bps rate move this month and next, the rate is expected to remain at 3.75% for nearly a year to ensure inflation, this is still more than three times the target set by the European Central Bank.

Policymakers have been looking at underlying inflation trends and the impact of past hikes on the economy. They’ll also have fresh economic forecasts to digest this month after data released on Thursday showed the euro region suffered a mild winter recession.

Key Movers

On the pound front, investors are shifting their focus toward the United Kingdom Employment data, which will release next week. Higher interest rates by the Bank of England and expectations of more rate hike announcements by Bank of England, Governor Andrew Bailey would keep pressure on the overall hiring process. The main event on the data front will be next Tuesday's release of jobs and wages data.

While expectations of the Federal Reserve pause at the June event remain firm for the time being, with US inflation figures next week and the FOMC meeting following we expect to see heightened volatility during this time.

There are no scheduled releases on the US docket today. In the meantime, the market is pricing in another 25 bps at the Fed’s next gathering in June.

Expected Ranges

  • GBP/USD: 1.2250 - 1.2550 ▲
  • GBP/EUR: 1.1350 - 1.1700 ▲
  • EUR/USD: 1.0550 - 1.0800 ▲