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."

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