As broadly expected, the ECB left rates unchanged today.  What’s more, the European Central Bank (ECB) has signaled its intent to raise rates by 25 bps in July but left the door open to a 50 bps move in September. Still, economists at TD Securities do not believe that the EUR/USD is ready to push higher.

EUR/USD is at risk of returning to sub-1.07 If Lagarde cannot sound more hawkish

“ECB institutionalized dovishness wins out by essentially saying that it ‘intends to’ hike by 25 bps in July.” 

The ECB did throw a bone to the hawks by opening the door to a 50 bps hike in September if high inflation is sustained. But, with the ECB still focusing on ‘gradualism’ and a small upgrade to 2024 inflation (to 2.1%), we do not get the sense that EUR/USD is ready to push higher, particularly with the risk of a stronger US core CPI read tomorrow (on a MoM basis).”

“If Lagarde cannot sound more hawkish in the press conference, EUR/USD is at risk of returning to sub-1.07.”