ECB: Relatively hawkish rate decision to support the euro – Commerzbank

The euro was able to appreciate against a weaker dollar over the past few days. Will the European Central bank (ECB) be able to provide further support to the euro? In the view of economists at Commerzbank, that is possible.

ECB provides additional support for the euro

“Even though the ECB will likely have to adjust its growth projections to the downside in December, the current situation in connection with gas supplies suggests that the ECB might continue to sound hawkish despite a weakening of the economy and pessimistic sentiment indicators and that it might underline its plans to stick to its planned restrictive rate cycle. That might provide additional support to the euro.”

“I urge caution. First of all, the big unknown of ‘how tough is the winter going to be’ (and how deep might a recession be as a result of gas rationing) is still the elephant in the room. Secondly, Russian government's comments about the use of dirty weapons make me worry about their possible use. If that were going to be the case, risk aversion on the market would rise significantly, with the euro coming under significant pressure once again.”

See – ECB Preview: Forecasts from 15 major banks, no obstacles to a 75 bps hike