MUFG Senior Currency Analyst Lee Hardman discusses the upcoming ECB policy meeting and its implications for the Euro. The EUR/USD has dipped below the 1.1800-level after reaching a high of 1.2081 last week. Hardman expects the ECB to maintain its current policy stance, with a higher risk of further easing rather than a rate hike. The Euro’s strength has raised concerns among ECB policymakers, but significant pushback is not anticipated at the meeting.

Market expectations for ECB meeting

“We are not expecting today’s ECB policy meeting to provide a fresh catalyst for euro performance in the near-term. The ECB are likely to reiterate that they are comfortable with their current policy stance but are unlikely to completely rule out the prospect of further easing.”

“We expect the ECB to leave their policy rate on hold through 2026, but judge that there is a higher risk of another cut than a hike given inflation is likely to undershoot their target.”

“A couple of ECB policymakers expressed some concern over euro strength last week when EUR/USD rose briefly above 1.2000, but we doubt that they will push back strongly at today’s policy meeting.”

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