Luis de Guindos: Presentation of the European Central Bank Annual Report 2025 to the Committee on Economic and Monetary Affairs of the European Parliament

What the desk is arguing

The desk believes that the ECB's cautious stance, as articulated by de Guindos, will support the euro against the dollar in the short term. He highlighted that inflation remains a critical concern, which suggests that any rate hikes will be gradual and data-dependent.

The ECB's inflation target remains at 2%, and with current inflation rates hovering around 3.5%, the central bank is likely to maintain a steady hand. This aligns with our expectation that the EUR/USD will trade in a range, reflecting the balance between inflationary pressures and the ECB's cautious approach.

Where it sits in our coverage

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

This view aligns with jpmorgan, which sees the euro strengthening, while bofa holds a more bearish outlook, suggesting divergence in expectations for the euro's performance against the dollar.

How other firms see it

Firms like jpmorgan and citi are aligned with our view, anticipating a stable euro as the ECB navigates inflation concerns. Conversely, bofa and goldman express a more cautious outlook, predicting potential weakness in the euro if inflation does not subside.

Key indicators to watch include the upcoming inflation data from the Eurozone and the ECB's next policy meeting, which will be crucial for assessing the trajectory of EUR/USD. The interplay between ECB policy and US economic indicators will also be significant in shaping market sentiment.

What the calendar says

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