ECB: A dovish ECB today is almost imminent – ING

The market has firmed up its view that the ECB will cut by 25bp today. There are chances of a 50bp cut, and there could be some downward revision to growth and perhaps even inflation forecasts today, ING’s FX analyst Chris Turner notes.

ECB is set to cut by 25bp today

“In focus will be whether the ECB reduces these inflation forecasts which in September were set at 2.5%, 2.2% and 1.9% for 24, 25 and 26 respectively. For example, dropping the 2025 forecast closer to 2.0% could potentially lay the path for an accelerated easing cycle.”

“Market pricing of the ECB already sees rates being cut into accommodative (sub-2%) territory next summer. That pricing could drift even lower. Overall we remain bearish on EUR/USD and don't see the case for the ECB to aggressively push back against current market pricing.”

“However, there is quite a large FX option expiry around 1.0550 today and we cannot rule out EUR/USD having to consolidate around here or trading 1.0550 at the 16CET option expiry today if Christine Lagarde has not sufficiently fed the euro bears.”