ING’s Chris Turner expects the Euro to trade in tight ranges as markets await Thursday’s European Central Bank (ECB) meeting. He notes the ECB is unlikely to hike but must keep a rate increase on the table given high Oil-driven inflation expectations. ING believes a strong warning about a possible June hike can keep EUR/USD supported near 1.1700 this week.

ECB communication key for Euro

"The highlight of the eurozone calendar this week will be Thursday's European Central Bank meeting."

"The stagflationary shock of the oil crisis is already starting to show up in European data, and while not hiking rates on Thursday, the ECB will still have to present a strong message that a rate hike is on the table."

"With high oil prices keeping inflation expectations at their highest (e.g., two-year EUR inflation expectations derived via the inflation swap are still above 2.80%), any signs that the ECB is looking through the inflation spike could see the euro punished."

"That is not our call, and we feel that a strong warning over a June rate hike can keep EUR/USD supported near 1.1700 this week."

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