The European Central Bank is expected to deliver another interest rate increase this week, pushing the deposit rate to 2.50 percent, according to Nomura strategists. The investment bank anticipates the ECB will hold rates at this level for an extended period following the hike. However, Nomura warns that risks are tilted toward additional tightening beyond current expectations, suggesting the ECB may need to go further if inflation remains stubborn across the eurozone.
The forecast comes as markets closely watch central bank policy amid persistent price pressures. Traders and brokers should prepare for potential volatility in EUR pairs and European fixed income markets surrounding the rate decision. The upside risk assessment indicates the ECB may adopt a more hawkish stance than markets currently price in, which could strengthen the euro while pressuring European equities and bonds.
FXnCO Insight
Position for continued euro strength and consider reducing exposure to rate-sensitive European assets as the ECB signals its inflation fight may require more aggressive action than currently anticipated.
Source: FXStreet