ECB policymaker Kocher says waiting in April meeting was a justifiable decision

What the desk is arguing

The desk views Kocher's remarks as indicative of a precarious balancing act for the ECB, where inflationary pressures from external conflicts could jeopardize economic recovery. Per the full note source, Kocher highlighted the potential for stagflation, even as the labor market remains resilient, suggesting that the ECB must remain vigilant and ready to act if inflation expectations begin to shift.

Supporting this view, the desk notes that the ECB is facing significant pressure from rising energy prices and the potential for second-round effects stemming from the ongoing conflict. With market participants pricing in a high likelihood of a rate hike by June, the ECB's credibility hinges on its ability to respond to these evolving risks.

Where it sits in our coverage

Our consensus target for EUR/USD stands at 1.075, with a range from 1.04 to 1.12. Notable firms include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)

This perspective aligns with jpmorgan, which anticipates a more aggressive ECB response, while bofa remains cautious, suggesting a lower target. The desk's outlook sits at the upper end of the consensus range, reflecting a belief in imminent policy action.

How other firms see it

Firms like jpmorgan and goldman are aligned with the desk's view, suggesting that the ECB will need to respond to inflationary pressures sooner rather than later. Conversely, bofa and citi express skepticism about the need for immediate action, citing potential economic headwinds.

The trajectory of EUR/USD will be closely tied to ECB policy shifts, particularly as inflation indicators and geopolitical developments unfold. Additionally, watch the interplay between the ECB's decisions and the Federal Reserve's stance, as this could create volatility in the FX markets.

What the calendar says

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