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- EUR/USD: Fed to outpace the ECB in terms of hawkishness, pummeling the euro – Nordea
EUR/USD: Fed to outpace the ECB in terms of hawkishness, pummeling the euro – Nordea
The European Central Bank (ECB) delivered an array of hawkish comments and left the door open to change course as early as the March meeting. Economists at Nordea continue to think that rate hikes are not this year’s business, supporting a lower EUR/USD, but the market clearly disagrees.
Early rate hikes on the table
“The ECB now sees inflation risks to the upside, is unanimously concerned about such risks and opened the door for even earlier rate hikes.”
“We still think the ECB will proceed rather cautiously and it will take time for the picture on wage growth to become clearer and continue to find rate hikes as early as this year less likely.”
“The inflation outlook is very uncertain, which was also illustrated by the ECB wanting to leave all doors open.”
“Looking beyond near-term volatility, we do expect long bond yields to creep further up, see more widening potential for bond spreads and expect EUR/USD to still head lower, as we continue to see more room for the Fed to surprise hawkishly this year compared to the ECB.”
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