ING’s Francesco Pesole highlights that markets now price only 6bp for a European Central Bank (ECB) hike on 30 April, while around 55bp remains priced by year-end. He expects tightening expectations to stay above 50bp unless the ECB turns explicitly dovish, leaving the Euro relatively well positioned versus the Japanese Yen (JPY) and Swiss Franc (CHF), with EUR/USD seen stabilising around or slightly below 1.1700.

ECB path underpins single currency

"Pricing for a 30 April hike from the European Central Bank is now only 6bp. That mirrors not just the de-escalation (55bp remains priced in by year-end), but probably the view that the ECB won’t have enough evidence to act, and the energy price outlook may still be uncertain in three weeks’ time."

"June and September look like the market’s preferred windows for rate hikes, although a follow‑up move in July after a June hike is around 50% priced."

"What matters most at this stage is the stickiness of tightening expectations. As discussed on several occasions, we expect pricing to remain above 50bp unless the ECB delivers explicit dovish signals, even if oil prices ease somewhat further."

"That backdrop leaves the euro well-placed, in our view, to outperform other low‑yielders such as the Japanese yen and the Swiss franc."

"For EUR/USD, we look for some stabilisation around or slightly below 1.170 for now, with a good deal of positives already in the price."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)