Markets have already priced a 25bp ECB rate hike and 75bp of tightening, limiting further euro gains against the dollar.
The European Central Bank’s anticipated 25bp rate hike to 2.25% is fully priced into markets, alongside expectations of 75bp of additional tightening by early next year. This aggressive pricing leaves little room for further euro upside unless the ECB signals another hike in July.
EUR/USD faces resistance near 1.1565/75, with risks tilted toward 1.1500 on stronger-than-expected US PPI data. Short-term euro swap rates are unlikely to rise without a clear hawkish signal from the ECB, capping near-term gains.
Markets have already factored in a stagflationary response, suggesting limited scope for further tightening beyond current expectations.