Euro braces for ECB tone today as ING sees a 25bp hike either way
Today's ECB meeting carries significant weight, primarily due to the anticipated tone and guidance rather than the decision itself, which ING expects to result in a 25 basis point hike in various scenarios. Specifically, the EUR/USD range projected by ING stretches from 1.150 to 1.168, with current prices near 1.161, indicating substantial volatility around the press conference. As traders position for the outcome, the market appears to be balanced, leaving room for pronounced movements depending on the nuances of the guidance given by the ECB. Per the full note , market participants are keenly focused on language surrounding inflation risks and growth forecasts, which may shift sentiment in this key currency pair.
What the desk is arguing
The desk anticipates that the ECB meeting today will be pivotal, with a 25 basis point hike expected across all scenarios laid out by ING. This move places specific emphasis on the accompanying commentary, as inflation expectations are significantly influenced by rising energy costs and geopolitical tensions, notably the ongoing war in the Middle East.
ING's analysis suggests that the market's current positioning, with the euro and 10-year Bund yields at 1.161 and 3.40%, respectively, could lead to increased volatility following the press conference. The anticipated EUR/USD movement hinges on how the ECB balances its language regarding inflation and growth projections, given the significant weights assigned to different scenarios ranging between 1.150 and 1.168.
Where it sits in our coverage
Currently, the consensus target for EUR/USD is 1.1700 for December 2026, with a range spanning from 1.1200 to 1.2000. Specific targets from firms include: - HSBC: Mar26 1.1700 - Morgan Stanley: Mar26 1.2000 - DanSkebank: Mar26 1.1866
The desk's view aligns closely with the prevailing consensus. Notably, this sits towards the higher end of the spread, which reflects a bullish sentiment given the ECB's tightening cycle, in contrast to Lloyds, which has a more conservative target of 1.1200 for the same tenor.
How other firms see it
Several firms are aligned with the expected ECB hike and anticipate corresponding upward movements in EUR/USD; these include ING and RBC with their targets of 1.1700 and 1.1600, respectively. Conversely, cautious forecasts come from CIBC, expecting a more subdued outlook at Mar26 1.1866.
Traders should also keep an eye on the broader implications of these rate moves on USD/JPY, as shifts in ECB policy could lead to cross-currency implications given the differing monetary policies in play.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01ING expects a 25 basis point ECB rate hike, with significant focus on the tone and guidance to follow.
- 02EUR/USD is projected to range widely based on market reactions, from 1.150 to 1.168.
- 03Current positioning indicates stable expectations but room for volatility depending on ECB communication.
- 04Geopolitical risks, particularly from the Middle East, add complexity to inflation and growth forecasts.
Market implications
Market watchers should pay particular attention to the ECB's upcoming guidance, especially how it might influence EUR/USD movement beyond the initial rate hike. A decisive statement could extend movements towards the higher end of 1.168.
Risks to this view
A dovish outcome from the ECB, signaling a prolonged pause or apprehensions about the bond market, could reverse the current bullish sentiment towards the euro, pulling EUR/USD down significantly.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
UOB | Bullish | 1.1800 |
Société Générale | Bearish | 1.1400 |
Scotiabank | Bullish | 1.1700 |
With ING pencilling in a 25 basis point hike across every scenario it considers, today's meeting is likely to be less about the rate decision itself and more about the accompanying language and projections. The spread ING lays out between its most dovish and most hawkish outcomes, EUR/USD ranging from 1.150 to 1.168 and the 10 year Bund yield from 3.30% to 3.45%, points to meaningful two way risk around the press conference rather than the decision itself. Given the euro and Bund currently sit close to the middle of that range, at 1.161 and 3.40% respectively, positioning into the announcement looks reasonably balanced, leaving room for a sharp move once the tone of the guidance becomes clear. --- Earlier: ECB preview: A rate hike expected as markets focus on Lagarde, inflation and future policy European indices: Prices of major European indices move lower as Brent passes $100 --- ING thinks the ECB's rate move today is close to a formality, it is the tone of the guidance that will actually move markets.
Summary: ING expects the ECB to deliver a 25 basis point hike today in every one of the four scenarios it has laid out, taking the depo rate up from its current 2.25% level The bank's current baseline read is that inflation risks are tilted to the upside due to higher energy prices and possible second round effects, while growth risks are skewed to the downside in the near term because of the war in the Middle East ING's own base case is a dovish hike, where inflation gets revised slightly higher but the overall balance of risk stays broadly unchanged, and growth projections improve even as downside risks persist, with only a slight pushback against market pricing A more dovish scenario would see the ECB signal a prolonged pause and flag concerns about the bond market, while a more hawkish scenario would point to clear hints of a further hike in October and potentially beyond ING attaches different EUR/USD and 10 year Bund yield levels to each scenario, ranging from 1.150 and 3.30% in the very dovish case to 1.168 and 3.45% in the hawkish case The euro and Bund yield currently sit at 1.161 and 3.40%, closest to ING's neutral scenario, where inflation risks are seen rising again but growth risk is viewed as more balanced ING expects the European Central Bank to raise its deposit rate by 25 basis points at today's meeting regardless of which way the tone of the accompanying guidance breaks, according to a scenario framework the bank published ahead of the decision. The current depo rate stands at 2.25%, with the ECB maintaining a data dependent, meeting by meeting approach heading into the announcement. The bank's note, illustrated in an accompanying graphic, sets out four possible outcomes built around inflation, growth and the tone of interest rate guidance.
In the current stance, ING sees upside risks to inflation from higher energy prices and the possibility of second round effects, while growth risks remain tilted to the downside in the near term because of the war in the Middle East. At the dovish end of the spectrum, ING's very dovish scenario has the ECB delivering the expected hike while signalling a prolonged pause and voicing concern about bond market conditions, a combination the bank associates with a weaker euro near 1.150 and a 10 year Bund yield around 3.30%. ING's own base case sits just above that in a dovish hike scenario, where inflation projections are revised slightly higher without shifting the broader balance of risk, growth forecasts improve while downside risks linger, and policymakers offer only a slight pushback against market pricing while keeping their options open.
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