Economists at TD Securities discuss the European Central Bank (ECB) interest rate decision and their implications for the EUR/USD pair.
Hawkish (5%): 25 bps hike & bias to Sep hike
No material change to the decision vs. June. 25 bps hike and no change to balance sheet policy. President Lagarde suggests that the base case should be a hike in September and that the data has to prove otherwise. EUR/USD +0.25%.
Base Case (70%): 25 bps hike & cautious language
No material change to the decision vs. June. 25 bps hike and no change to balance sheet policy. Lagarde remains ambiguous about September – if data supports it, then the Governing Council will hike. This isn't about surprises to the data vs the June projections, but a broader statement that puts the onus on macro-dynamics to justify a hike. Lagarde says that policy moves beyond September are purely a function of data. EUR/USD -0.15%.
Dovish (25%): 25 bps hike & high bar to further hikes
No material change to the decision vs. June. 25 bps hike and no change to balance sheet policy. Lagarde makes it clear that the data has to surprise to the upside (vs ECB June projections) to see a hike in September. In other words, while it's not impossible, there's a relatively high bar to it. She doesn't say that the ECB has reached its terminal rate, but that's the implication. EUR/USD -0.75%.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD declines toward 1.0300 ahead of US data
EUR/USD stays under bearish pressure and declines toward 1.0300 on Wednesday. The broad-based US Dollar (USD) strength ahead of ADP employment data weighs on the pair. Later in the American session, the Fed will publish the minutes of the December meeting.
GBP/USD slumps toward 1.2400 on persistent USD strength
GBP/USD remains on the back foot and extends its daily slide toward 1.2400, undermined by a risk-off market sentiment and elevated US Treasury bond yields on increased hawkish Fed bets. Traders look to US data, Fedspeak and FOMC Minutes for fresh trading impulse.
Gold stabilizes near $2,650; upside seems limited ahead of FOMC Minutes
Gold price (XAU/USD) fluctuates in a narrow range at around $2,650 on Wednesday. The benchmark 10-year US Treasury bond yield holds at its highest level since late April near 4.7%, making it difficult for XAU/USD ahead of FOMC Minutes.
Bitcoin Price Forecast: BTC edges below $96,000, wiping over leveraged traders
Bitcoin's price continues to edge lower, trading below the $96,000 level on Wednesday after declining more than 5% the previous day. The recent price decline has triggered a wave of liquidations across the crypto market, resulting in $694.11 million in total liquidations in the last 24 hours.
Five fundamentals for the week: Nonfarm Payrolls to keep traders on edge in first full week of 2025 Premium
Did the US economy enjoy a strong finish to 2024? That is the question in the first full week of trading in 2025. The all-important NFP stand out, but a look at the Federal Reserve and the Chinese economy is also of interest.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.