Euro Area Watch: ECB review: Indeed, a short hiking cycle

研报英文原文证据摘录

Euro Area Watch: ECB review: Indeed, a short hiking cycle

Rates: relief rally in rates

The rates market rallied on the back of the ECB’s press conference. President Lagarde

repeated her analysis on the different types of energy price shocks and the differences

in response they necessitate (look through, measured, forceful). Her emphasis on

“measured” being the right response left the market reassured that the three hikes

currently priced are likely a maximum. Lagarde also flagged the rather optimistic wage

growth assumptions underpinning the ECB’s forecasts, which also suggest that the

chance of cuts in 2027 may be higher than previously priced. The money market curve

inverted slightly further, and Bunds outperformed USTs, in line with our view.

EUR: limited impact, measured would be good

The ECB meeting’s EUR impact was limited, with the FX price also somewhat affected

by Iran headlines and the US PPI numbers. Most clients perceive ECB hikes as either risk

management or a policy mistake, which has been in line with the downward move in

belly real rates since the start of the war. Balanced guidance and a measured response

would be the “sweet spot” for the EUR.

In the near term and beyond the ECB, we maintain a bearish EUR bias (vs. USD and

GBP), viewing energy futures as overly optimistic and expecting Euro area data to

remain weak over the summer. A more positive medium-term scenario for EUR is

plausible if inflation proves persistent due to second-round effects. In this case, a pre-

emptive ECB may reinforce its credibility vs. other, more ambivalent, central banks.

Monetary policy aside, ECB efforts to strengthen EUR’s international role support our

constructive medium-term EUR view.

2 Euro Area Watch | 11 June 2026

CR