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Sep 08 - 12:55 AM

EUR: The Thick Line Between 50 And 75 - Barclays

By eFXdata  —  Sep 07 - 04:30 PM

Barclays Research discusses its expectations for tomorrow's ECB policy decision.

"The markets are pricing a 68bp hike at this week’s meeting, 123bp by the October meeting and 174bp by year-end, cumulatively. We have also changed our ECB call and are now forecasting a 75bp hike at this week’s meeting, followed by 50bp and 25bp hikes in October and December, respectively, bringing the depo rate to 150bp by year-end. We also expect that President Lagarde could indicate during the press conference that a discussion on the end of reinvesting proceeds of the APP portfolio could take place in coming meetings, signaling another hawkish normalisation step," Barclays notes. 

"As the markets are not fully pricing 75bp at September’s meeting, such hawkish results could push EUR higher in the short term, but the sanguine economic forecasts for the euro area and ongoing energy concerns should keep the EUR under pressure in the medium term. If the ECB underdelivers, for example if it hikes by 50bp, the implication for the EUR could be a lot different and EUR/USD could test the lows again," Barclays adds. 

Source:
Barclays Research/Market Commentary

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