Economists at TD Securities discuss the European Central Bank (ECB) interest rate decision and its implications for the EUR/USD pair.

Hawkish (30%): 75 bps Hike & Few QT Details

“The hawks win on the rates side, but don't make as much headway on QT as hoped, with few concrete guidelines released other than a commitment to start the programme in the coming months. EUR/USD +0.75%.”

Base Case (50%): 50 bps & QT Framework

“The Governing Council shifts down to a 50bps hike, but it's a compromise slowing in the pace of hikes, with a shift in focus toward QT to placate the hawks. Conditions around the date and pace of QT are likely to remain vague, with the earliest start likely to be in March. EUR/USD +0.15%.”

Dovish (20%): 50 bps & Few QT Details

“The Governing Council shifts down to a 50bps hike, but the doves largely rule the day. QT is outlined in only the most basic terms, leaving no guidance over pace and timing of balance sheet rundown. EUR/USD -0.50%.”

See – ECB Preview: Forecasts from 16 major banks, a hawkish surprise?