Nordea strategists forecast four ECB rate hikes this year while expecting the Fed to hold rates steady through 2025.
Nordea strategists predict the Euro could gain against the Dollar as the European Central Bank delivers more rate hikes than markets currently price. The firm expects four ECB hikes in 2024, exceeding the roughly three priced by investors, while the Federal Reserve remains on hold even if US inflation accelerates.
The divergence follows a shift in Fed expectations, with markets now pricing additional tightening after previously assigning probability to rate cuts. Nordea’s baseline scenario sees the Fed keeping rates unchanged over the next two years, contrasting with the ECB’s tightening path.
Strategists note growing divisions within the Fed could delay any response to rising inflation, as policymakers remain split between those favoring cuts and others open to further hikes. This policy split may weaken the Dollar over time if US inflation accelerates without Fed action.