ECB Quick Analysis: Five dovish things that down the euro, more may be in store

• The ECB has raised rates but has also subtly signaled the pace would slow.
• Saying a recession is more likely marks an acknowledgment of reality.
• Worries of a sharp fall in forward-looking surveys add to downside pressure on the euro.
• Ending forward guidance creates an uncertain environment that markets dislike. 
• The ECB will not squeeze its balance sheet anytime soon. 

A double triple – The European Central Bank has raised rates by 75 bps for the second time in a row. And that is where the good news for the euro ends. 

1) Substantial progress toward normalization: This ECB headline means the bank has already made significant progress in bringing borrowing costs back to normal. That implies a slower pace

2) The R-word: No more euphemisms such as "below-average growth." Lagarde said that there is a growing likelihood of a recession and "clear downside risks" to growth. Will the bank raise rates into a recession?

3) Sharp fall in confidence: Surveys about future economic activity are pointing down and the ECB is worried about what is going on with both business and consumer sentiment polls. 

4) "Showing our back to forward guidance:" Lagarde has repeated her stance that decisions will be taken on a meeting-by-meeting basis and used this colorful quote. While interest rates can go in both directions according to that, markets hate uncertainty and it adds pressure on what markets already know – the gloomy comments above. 

5) No squeeze of the balance sheet: In December, the ECB will set out the principles of reducing its balance sheet. Yes, only the principles, not an actual decision. What about loans to banks? It only offers "voluntary repayments" for banks. In other words, no pressure from the ECB – it does not want to see a British scenario for Italy. 

All in all, the Frankfurt-based institution is moving from fighting inflation to worrying about inflation. Only a surprising end to the war would change their minds.