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- ECB: 50 bp hike might give euro a knee-jerk boost – BBH
ECB: 50 bp hike might give euro a knee-jerk boost – BBH
Economists at BBH note that the US Dollar Index is pushing higher on Wednesday after having tested the 50% retracement objective of its June-July rally near 106.48 on Tuesday.
50 bp hike might give euro a knee-jerk boost
"Despite reports of a possible 50 basis point (bp) move by the ECB tomorrow, the euro rally ran out of steam near 1.0275. We see four potential outcomes tomorrow, most of them euro-negative."
"Best case outcome for the euro would be a 50 bp hike and the announcement of an aggressive anti-crisis tool, while the worst case would be 25 bp and further delays to the tool."
"In between would be a 50 bp hike and no tool or a 25 bp hike and an aggressive anti-crisis tool. We think the best case outcome is highly unlikely (15%), as is a 25 bp hike and aggressive anti-crisis tool (15%). As such, we are left with the worst-case outcome (35%) and 50 bp hike with no tool (35%) as the most likely outcomes."
"While a 50 bp hike might give the euro a knee-jerk boost, the fact that the ECB cannot come up with a credible anti-crisis tool should eventually weigh on the single currency. "
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