Preview: ECB set to hold rates in July, hints of September hike expected: ING
At a Glance
The ECB appears poised to maintain its current rates during the July meeting, with market participants leaning towards a hawkish hold that anticipates a September rate hike. Per the full note from ING, the bank forecasts EUR/USD stability around 1.140 and Bund yields at 3.15% in a hawkish hold scenario. Conversely, signs of dovishness could push EUR/USD lower to around 1.130 and yield a further drop in Bund yields. Given the current environment, the desk underscores the significance of oil price movements and potential ECB sentiment shifts as we look ahead to September decisions.
Key Takeaways
Full Analysis
What the desk is arguing
The desk posits that the ECB is likely to hold rates this July while signaling a potential hike in September. Recent analysis from ING supports this view, indicating a hawkish bias that keeps EUR/USD around 1.140 and 10-year Bund yields near 3.15%, which suggests that market sentiment is aligning with ECB tightening expectations.
The backdrop involves firm inflationary pressures linked to oil prices, complicating the ECB's decisions. ING suggests that the EUR/USD pair faces downside pressure toward 1.130 if the ECB hints at a dovish stance, underscoring market sensitivities to central bank communications.
Where it sits in our coverage
The median consensus target for EUR/USD stands at 1.16, with the following firm targets: bofa at 1.1700, goldman at 1.1200, and citi at 1.1300 for December 2026. The desk's position is marginally above the current spot price and also aligns closely with the consensus range.
How other firms see it
Several firms, including goldman, bofa, and citi, are aligned with the desk's view, expecting a gradual strengthening of the euro against the dollar. Conversely, HSBC predicts a more bearish outlook, with targets suggesting a weaker euro, signifying a divergence in perspectives.
The trajectory of EUR/USD will likely reflect broader EUR sentiment influenced by the ECB's actions and the dynamics of oil prices, indicating a close watch on energy markets in the forthcoming month.
Market Implications
Watch for EUR/USD levels around 1.140 and 1.130 that could signal changing sentiment. Focus on how any language from the ECB regarding rate expectations may impact positioning leading into September.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
BNP Paribas | Bearish | 1.1500 |
UBS | Bullish | 1.1800 |
UOB | Bullish | 1.1800 |
From the original
ING's scenario analysis frames a hawkish-leaning hold as the base case, with EUR/USD seen holding around 1.140 and 10-year Bund yields near 3.15% under that outcome. A more dovish tilt would likely pull EUR/USD back toward 1.130 and Bund yields toward 3.05%, while a surprise 25bp
Related speeches
4 itemsJuly ECB Cheat Sheet: No lull in sight
The ECB is poised to maintain its current interest rates at the July meeting, despite potential hawkish nuances in communication. This event, marked by geopolitical tensions and rising energy prices, could indicate a shift towards further tightening in September, as hinted at by ING Research. However, with the EUR/USD currently trading at 1.1434, the consensus range suggests divergence in expectations among institutional players, with targets spanning from 1.11 to 1.26. Per the full note, the upcoming meeting might see the governing council balancing market positioning and inflation risks, particularly in an environment influenced by surging oil prices.
Rates Spark: Oil back above $100
Per the full note [source], ING's Benjamin Schroeder and Padhraic Garvey argue the ECB will deliver a 25bp hike to a 2.50% deposit rate today, but that the market is priced too hawkishly for what comes after — oil above $100/bl and record-high European gas add cost-push complexity rather than a clean hiking signal, and nervousness around eurozone fiscal trajectories reinforces a dovish bias. The desk's core claim is that a dovish ECB surprise is more likely than a hawkish one, precisely because markets already discount more than 50bp of further tightening beyond September, taking the deposit rate to at least 3%. Our coverage shows EUR/USD spot at 1.1446 against a Mar-26 consensus of 1.1700 (range 1.1200–1.2000) and a Dec-26 median of 1.1700, so the street is structurally long euros relative to spot — a stance that leans on the same ECB-hawkishness that ING is fading. No high-impact events sit on the calendar in the next 30 days, meaning the proximate driver for the pair is the ECB communication itself, not incoming data.
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