ECB Rate Hike Puts EURUSD in Focus

The European Central Bank is widely expected to raise interest rates by 25 basis points to 2.50% today, as renewed energy price pressures push eurozone inflation higher. Brent crude has climbed above $100 a barrel, while higher gas prices are adding to concerns that inflation could remain elevated for longer.

Markets are also increasing bets on further ECB tightening. Interest-rate swaps are pricing in around 90 basis points of additional rate hikes by the end of 2027, reflecting expectations that the ECB could keep policy restrictive if inflation remains persistent.

EURUSD — Bullish Bias

A more hawkish ECB outlook could support the euro by keeping European interest-rate expectations elevated. With the euro already trading around $1.16, further signals of additional rate hikes could provide fresh upside momentum for EURUSD in the near term.

Markets will therefore focus not only on the expected 25bp hike, but also on ECB President Christine Lagarde’s comments on the future rate path. A stronger-than-expected hawkish signal could further strengthen the bullish bias for EURUSD.