If even ÖNB Governor Robert Holzmann considers rate cuts to be just as likely as further rate hikes there is a lot to suggest that the dovish majority of the ECB board is more likely to tend towards rate cuts than rate hikes.

It is marginally relevant for the Euro whether ECB interest rates rise or fall. However, for the overall picture something else matters: whether in case of a renewed rise of inflation, the ECB would be prepared to implement further monetary policy tightening.

If one assumes sufficient willingness on the part of the ECB to do that one nonetheless does not have to expect rate hikes. Perhaps because one assumes that inflation pressure will ease further. If one considers the ECB to be sufficiently reactive and determined that suggests that inflation risks can be assumed to be low. And that in turn supports the single European currency.

Long-term I am sceptical whether such an optimistic view of the ECB really is justified. However, at present there is little evidence against it. For that reason, I consider comments like those of Holzmann to be not excessively EUR-negative in the current environment.