Rates rising: Nordea's experts see continued upward pressure
At a Glance
Lead — Nordea's recent analysis highlights the ongoing upward pressure on interest rates due to persistent inflation driven by geopolitical factors and structural changes within economies. Per the full note , they foresee three additional rate hikes from the European Central Bank by the first quarter of 2027 as inflation in the euro area persists above targets, hovering around 3%. This outlook contrasts with broader market sentiment that lacks a consensus on the pace of rate increases, suggesting a cautious approach among traders. Investors should prepare for potential dislocations ahead as markets begin to price in these higher yields.
Key Takeaways
- 01Nordean economists predict three more ECB rate hikes in 2026, indicating sustained inflationary pressure.
- 02Current inflation in the euro area is significantly above the ECB's 2% target, now at about 3%.
- 03The upward trend in interest rates is driven by both geopolitical tensions and structural economic changes.
Full Analysis
What the desk is arguing
The desk posits that the upward trajectory of interest rates will continue through the upcoming months, fueled by a resurgence in inflation not solely linked to energy prices. Nordea's economists highlight that structural inflationary pressures, including US trade policies and European defense spending, will necessitate further action from central banks. This is underpinned by their forecast of three ECB rate hikes by early 2027.
Supporting this view, the ECB's current rate is expected to increase by a full percentage point by early 2027, moving distinctly away from the zero-rate environment that characterized pre-pandemic years. Observations from Nordea suggest that historical context combined with current economic indicators presents a compelling case for sustained rate increases, necessitated by this inflationary landscape.
Where it sits in our coverage
Currently, our consensus target for the EUR/USD pair stands at 1.075, with a range between 1.04 and 1.12. Notably, jpmorgan anticipates a target of 1.10 for March 2026, while bofa takes a more cautious stance with a target of 1.04.
This bullish view aligns with jpmorgan's target, suggesting the desk's call is firmly in line with the upper bound of the spread, contrasting with bofa's more pessimistic outlook on the euro return.
How other firms see it
The majority of firms appear to be aligned with the view that further rate increases are on the horizon, with jpmorgan and db both forecasting similar upward movements in rates. Conversely, bofa remains skeptical about the pace of these hikes, advocating for a more conservative view regarding future rate changes.
This discourse intersects particularly with EUR/USD dynamics, indicating that traders should closely monitor ECB rate announcements as they continue to shape market sentiment amidst ongoing inflationary concerns. The trajectory of euro core inflation will also be key to gauging market reactions.
Market Implications
Watch for the EUR/USD to react to any ECB chatter regarding rate hikes, particularly if bullish sentiment increases. Key resistance levels are likely around 1.10, where traders may position themselves ahead of any rate announcements.
From the original
Markets and investment Rates rising: Nordea's experts see continued upward pressure 11-08-2026 3 min to read The article is based on Nordea's latest quarterly Rates and FX webinar, in which economists Jan Størup Nielsen and Samir Barki reviewed the key trends in financial markets
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