EUR/USD could slide towards 1.08 as ECB may disappoint hawkish expectations – ING

EUR/USD has climbed back above 1.09 ahead of today’s European Central Bank (ECB) policy meeting. In the view of economists at ING, the ECB message may disappoint hawkish expectations, dragging EUR/USD down to the 1.08 level.

Some patience should still emerge in ECB message

“Our base-case scenario is that the ECB will fall short of the market’s expectations around a hawkish tilt in the message, as the uncertainty about the development and economic implications of the Ukraine conflict should encourage policymakers to keep their options open. In practice, this means that along with a well-telegraphed openness towards a 2022 hike, we may see a reiteration of sequencing and an unchanged APP purchase schedule.”

“ECB falling short of the market's hawkish expectations may translate into a weaker euro, which is still looking at an unsupportive external environment due to uncertainty around the French elections and the Russia-Ukraine conflict.”

“EUR/USD may slide back towards the 1.08 mark today.”

See – ECB Preview: Forecasts from 12 major banks, tighter policy in response to higher inflation