Markets price less than 5% chance of a July hike as ECB prepares to hold rates at 2.25%, with hints of a September move.
The European Central Bank is poised to keep interest rates unchanged at 2.25% during its July meeting, with markets assigning a less than 5% probability to a hike. Analysts anticipate a hawkish-leaning hold, with signals of a potential September rate increase likely communicated through post-meeting channels rather than the official statement.
ING’s baseline scenario projects EUR/USD at 1.140 and 10-year Bund yields near 3.15% under a hawkish hold, while a surprise 25-basis-point hike could push the pair to 1.150 and yields to 3.20%. A dovish shift, however, may drag EUR/USD toward 1.130 and yields to 3.05%. Oil prices and Federal Reserve policy remain key drivers for ECB decisions.
A September hike is nearly fully priced in unless crude prices ease, though FX strategists warn that a hawkish ECB alone may not sustain EUR/USD above 1.140, with a retest of June lows near 1.133 seen as a near-term risk.