Credit Agricole CIB Research discusses the ECB policy trajectory."EUR/USD has regained some ground more recently on the back of growing Eurozone rate
Credit Agricole CIB Research discusses the ECB policy trajectory.
“EUR/USD has regained some ground more recently on the back of
growing Eurozone rates and yields that have helped the EUR-USD rate
spread consolidate. The latter moves reflect growing ECB rate hike expectations as market estimates of the terminal policy rate hit 4% in the wake of surprisingly strong inflation data out of France and Spain yesterday,” CACIB notes.
“We think that the path of least resistance for the Governing
Council in coming months would be to push rates higher but in a more
data dependent and gradual way than before. The approach would
give the ECB the flexibility to respond to the growing negative impact
of its policy tightening on the Eurozone’s lending channel and address
the need to start reducing the ECB’s balance sheet,” CACIB adds.
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