Rates Spark: Oil back above $100
Per the full note , 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.
What the desk is arguing
ING's rates team frames today's ECB decision as a hike with an open-ended path. The market is fully discounting the 25bp move to a 2.50% deposit facility rate, and is additionally pricing more than 50bp of tightening beyond September to reach at least 3%. Per the full note , the desk thinks that pricing is too aggressive and that a dovish surprise is the more likely outcome.
The supporting evidence is a commodity complex that complicates the hike-and-hold narrative: oil has breached US$100/bl and European gas prices are at record year-to-date highs as geopolitical tensions flare again. ING notes markets have been running a predictable playbook where every oil move is captured in the 2Y rate — but argues gas now deserves equal attention, and that the ECB's own forecasts will already be based on outdated market snapshots, making forward guidance unusually difficult.
The implicit counterfactual is a hawkish ECB that validates the 3% terminal pricing. ING effectively rejects that read, arguing that with the market already positioned so aggressively, the bar for the ECB to push pricing further is high — and that fiscal nervousness across the eurozone tilts the risk toward a more cautious message, defaulting to meeting-by-meeting guidance.
Where it sits in our coverage
Our cross-firm data shows a Mar-26 EUR/USD consensus of 1.1700 within a 1.1200–1.2000 range, and a Dec-26 median of 1.1700. At spot 1.1446, the street is positioned for euro appreciation — consistent with a hawkish-ECB read that contrasts with ING's dovish-surprise call.
Notable Dec-26 targets span the distribution:
- morganstanley at 1.2150 (most bullish)
- cibc at 1.2200
- nomura at 1.2000
- rbc at 1.2000
- hsbc at 1.1000 (most bearish)
- danskebank at 1.1100
- lloyds at 1.1200
ING's own house view in our coverage sits at Mar-26 1.3400 for GBP and 159.00 for USD/JPY, but the euro call implied by this rates note — a dovish ECB surprise — maps closer to the bearish end of our EUR/USD distribution, alongside hsbc, danskebank, and lloyds, than to the 1.1700 median. The desk's call is effectively at odds with the morganstanley / cibc / nomura bullish block.
How other firms see it
On the hawkish-ECB read that ING is fading, the aligned block is morganstanley (Dec-26 1.2150), cibc (1.2200), nomura (1.2000), rbc (1.2000), and barclays (1.2100). On the dovish side — closer to ING's implicit euro-negative bias — sit hsbc (1.1000), danskebank (1.1100), lloyds (1.1200), and anz (1.1400). The 0.12-handle spread between the top and bottom Dec-26 targets is unusually wide, reflecting genuine disagreement about the ECB's terminal rate.
The EUR/USD trajectory is mirrored by the GBP/USD and USD/JPY paths — the cable consensus Mar-26 sits at 1.3403 versus spot 1.3300, and the USD/JPY Dec-26 median at 152.00 versus spot 161.29. Watch the ECB press conference for guidance language, and watch European gas and Brent crude as the cost-push inputs ING flags as underappreciated relative to oil alone.
What the calendar says
No high-impact eurozone or US events are scheduled in the next 30 days, which removes the usual data-driven catalysts for EUR/USD and leaves the ECB's own communication as the dominant near-term repricing event. That makes the meeting-by-meeting framing central: with no prints to reset expectations, the guidance language in today's statement carries outsized weight for the 2Y rate and, by extension, the euro.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01ING expects a 25bp ECB hike to a 2.50% deposit rate today, but argues the market's pricing of 3%+ terminal is too aggressive and a dovish surprise is more likely.
- 02Oil above $100/bl and record YTD gas prices complicate the ECB's path, and ING notes markets may start pricing gas alongside oil in the 2Y rate.
- 03EUR/USD spot at 1.1446 sits below the 1.1700 Mar-26 consensus and Dec-26 median — the street is positioned for euro strength that ING's dovish-ECB call implicitly fades.
- 04Our Dec-26 EUR/USD range is wide (1.1000 HSBC to 1.2200 CIBC), and ING's implicit bias sits near the bearish end alongside HSBC, Danske Bank, and Lloyds.
- 05No high-impact calendar events in the next 30 days means ECB guidance language, not data, drives the next EUR/USD repricing.
Market implications
Watch EUR/USD around 1.1446 spot for the reaction to the ECB statement and press conference — a dovish surprise that validates ING's call opens a move toward the 1.1200 lower bound of our Mar-26 range, while a hawkish validation of the 3% terminal pricing pushes toward 1.1700+. Also monitor Brent and European gas as the cost-push inputs ING flags, since a further gas spike would reinforce the stagflationary complexity that argues against aggressive ECB tightening. USD/JPY at 161.29 versus a 152.00 Dec-26 median is the other key cross to watch for spillover if euro rates reprice.
Risks to this view
The primary invalidation is a hawkish ECB that explicitly endorses the market's 3%+ terminal pricing, which would force EUR/USD through the 1.1700 Mar-26 consensus and squeeze the bearish block. A sharp reversal in oil or gas prices — particularly a gas supply resolution — would remove the cost-push complexity ING cites and allow the ECB to lean hawkish with less fiscal constraint. Finally, a eurozone fiscal accident (e.g. a spread blowout in a periphery sovereign) would be euro-negative but for the wrong reason, and would decouple EUR/USD from the ECB path entirely.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
UOB | Bullish | 1.1800 |
Société Générale | Bearish | 1.1400 |
Scotiabank | Bullish | 1.1700 |
Articles Rates Spark: Oil back above $100 Published 07:20 Rates Spark Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download We think the ECB will hike rates, but the path thereafter remains open. Oil breaching $100 and record gas prices year-to-date add to the complexity. With markets already pricing in a very hawkish outlook, we still think a dovish surprise from the ECB is more likely.
Nervousness about fiscal trajectories in the eurozone also supports a dovish ECB bias Benjamin Schroeder and Padhraic Garvey, CFA The ECB is widely expected to raise its policy rate today by 25bp to 2.50% The $100 threshold has been passed and markets are quick to price in more hawkish central banks The European Central Bank is widely expected to raise its policy rates today by 25bp, which would take the deposit facility rate to 2.5%. This is a level which is widely regarded as marking the upper end of what is considered the neutral policy rate range. Markets are not only fully discounting today’s move already, they are also eyeing further tightening beyond September of more than 50bp, taking the deposit facility rate to at least 3%.
This comes, of course, on the back of oil prices topping US$100/bl and also gas prices marching higher amid geopolitical tensions flaring up again. Markets are still following a similar playbook whereby every move in oil is immediately captured by a predictable move in the 2Y rate. But with gas prices now higher than before, we could imagine markets starting to pay more attention to developments in gas too.
It also highlights the challenge for the ECB. Not only will the ECB’s new forecasts already be based on outdated market snapshots, but it also makes any guidance around a future path difficult. The default in such an uncertain environment is to stick to meeting-by-meeting guidance.
Given that the market is already priced very aggressively, we struggle to see how the ECB could push markets even further in that direction. While risks of second-round inflation effects are rising with the duration of the conflict, by the ECB’s own account, those effects have not been observed yet. And if anything, markets' aggressive stance and rising market rates also in the longer tenors are helping to tighten financial conditions.
Geopolitical tensions are pushing eurozone government bond spreads wider, while growing market concerns about debt sustainability could also stop the ECB from sounding too hawkish. As France has moved into focus, given the added layer of political uncertainty, we now see that 10y OAT swap spreads have become more closely correlated and sensitive to oil prices than Italian bonds. The latter had long proven to be the most exposed to geopolitical risk, not least given a larger reliance on energy imports from the crisis region in the beginning.
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