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

Base Case (65%): Hawkish 50 bps

“Core policies will see copy/paste from December decision. We expect the tone of the press conference to be relatively hawkish. President Lagarde is likely to repeat that 50 bps hikes are on the table for March and possibly May. While market pricing for terminal has moved up this week, she may still encourage it to move higher from here. EUR/USD +0.20%.”

Dovish (35%): 50 bps but change in guidance

“Core policies will see copy/paste from December decision. President Lagarde rows back on committing to a string of 50 bps hikes. She says that declines in headline inflation in recent months mean a further 50 bps is possible in March, but it's not clear it will be needed then, or beyond that. She doesn't comment on market pricing for terminal. EUR/USD -1.00%.”

See – ECB Preview: Forecasts from 14 major banks, another 50 bps hike