ECBs Lane:Monetary policy decisions will continue to be made on a meeting-by-meeting basis

What the desk is arguing

The desk frames this as a pivotal moment for the ECB, emphasizing that the central bank's response to inflation will be contingent on the persistence of energy price shocks. Lane's remarks indicate that while current inflationary pressures are being watched closely, the ECB is not inclined to react aggressively unless inflation becomes more entrenched. The commentary suggests that the ECB is balancing the risks of inflation against the potential for weakened economic growth due to energy price increases.

Supporting this view, Lane noted that global energy shocks are more detrimental than localized ones, which could lead to broader inflationary pressures. The current demand backdrop appears softer than in 2022, which may limit the pass-through of energy costs into inflation, further supporting the ECB's cautious stance.

Where it sits in our coverage

Our consensus target for EUR/USD is 1.075, with a range of 1.04 to 1.12. Key firms in our analysis include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26) - citi: 1.08 (Mar26)

This view aligns with jpmorgan, which supports a slightly stronger euro, while bofa takes a more bearish stance at the lower end of the range. The desk's call is positioned slightly above the consensus, indicating a belief in a more resilient euro than some peers suggest.

How other firms see it

Firms like citi and jpmorgan share a more optimistic outlook on the euro, suggesting that the ECB's cautious approach may support the currency in the medium term. Conversely, bofa holds a contrary view, anticipating a weaker euro amid persistent inflationary pressures.

The EUR/USD trajectory is likely to be influenced by the upcoming ECB meetings and inflation data releases, which will provide further insights into the central bank's policy direction and economic outlook.

What the calendar says

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