Technical Analysis

3 reasons why next week’s 75 bps ECB hike & hawkish talk unlikely to support EUR – ING

ING Research discusses its expectations for the EUR outlook around next week’s ECB policy meeting.

“While it’s true that the ECB has consistently surprised on the
hawkish side in the past few meetings, the positive impact on the euro
have been null. As shown in the table below, EUR/USD mostly weakened in the six hours following the last five ECB announcements,” ING notes.

We doubt there will be much support to the euro after the
October announcement, even if the ECB attaches a hawkish message to a
75bp rate hike, as: 1)
EUR/USD beta to short-term rate differentials has remained low; 2) markets have remained structurally pessimistic on the eurozone’s domestic outlook despite the recent drop in gas prices; and 3) the Fed’s hawkishness continues to fuel a strong dollar,” ING adds.

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