Euro: Hawkish ECB fails to lift Euro – Commerzbank
Michael Pfister at Commerzbank notes the European Central Bank (ECB) delivered a second rate hike this year and raised its inflation projections above 2%, which their economists see as pointing to another hike in December.
Commerzbank's Michael Pfister reports the European Central Bank (ECB) has increased interest rates twice this year and raised its inflation forecasts above 2%. While these hawkish policies suggest another rate hike in December, EUR/USD has weakened as markets now anticipate nearly two more hikes by year-end and an additional 40 basis points by mid-2027.
These expectations, Pfister anticipates, will ultimately prove inaccurate. The ECB's rate hike in the past week did briefly boost the euro, but EUR/USD is now trading lower again. This decline is attributed to a stronger US dollar and the heightened euro rate hike expectations stemming from the hawkish ECB meeting. Despite the further rate hike in December, Pfister expects these forecasts to be disappointed, hence refraining from revising the EUR/USD forecast upwards.
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