OCBC’s Sim Moh Siong expects the European Central Bank (ECB) to deliver a one-off 25 bp ‘insurance’ hike to 2.25%, with updated projections showing higher inflation and weaker growth. With this move largely priced in, Siong warns EUR/USD may struggle to advance without a fresh catalyst, especially as US‑Iran diplomacy stalls and geopolitical risks linger around the Strait of Hormuz.

Priced-in ECB move caps Euro gains

“ECB Week Risk: Monetary policy meetings return this week. The ECB is set to hike, while a BoC hike would be a clear surprise. Updated ECB projections should show higher inflation and weaker growth, supporting a one-off 25bp insurance hike in our view to 2.25%.”

“With the move fully priced, EUR/USD may struggle to rally without a fresh catalyst. Progress on a US-Iran deal that reopens the Strait of Hormuz could help, but talks appear stalled.”

“Ceasefire hopes are keeping Brent below USD100/bbl for now. However, inventories are falling and the shrinking buffer could drive oil to new highs by late 3Q26 if diplomacy fails to progress.”

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