Investors already factor in two additional ECB rate hikes this year, limiting Euro support despite hawkish signals.
The European Central Bank’s latest guidance left the Euro slightly weaker as President Lagarde avoided clear signals on further rate hikes. Markets had already priced in two additional 25-basis-point increases by year-end, reducing the impact of the ECB’s hawkish tone.
Analysts note that the timing of the next hikes—whether in July or later—remains critical. An earlier move could signal urgency but may also raise concerns about over-tightening, potentially leading markets to price in future cuts. This uncertainty clouds the Euro’s near-term outlook.
EUR/USD saw modest gains yesterday, driven partly by U.S. geopolitical developments rather than ECB policy. However, the debate over rate hike timing continues to influence sentiment, with investors weighing the risks of a policy misstep.