Brown Brothers Harriman’s (BBH) Elias Haddad expects the European Central Bank’s (ECB) April Account to underline a tightening bias, with markets already pricing high odds of a June rate hike to 2.25%. Haddad argues that rate hikes in a weak growth, high inflation backdrop are not bullish for the Euro (EUR) and sees EUR/USD drifting lower towards 1.1400 as US growth outperforms.
ECB tightening backdrop weighs on Euro
“The ECB’s Account of the April 30 rate decision (Thursday) will provide more insights into policymakers’ tightening bias.”
“At that meeting, the ECB kept interest rates on hold at 2.00% for an 8th consecutive meeting.”
“Markets continue to imply 86% odds of a 25bps ECB rate hike to 2.25% at the next June 11 meeting.”
“Rate hikes in a low growth, high inflation environment, is not bullish for EUR but should help cushion the downside.”
“We see room for EUR/USD to edge lower towards support at 1.1400, reflecting a stronger US growth outlook relative to the Eurozone.”
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