Chart alert: EUR/USD minor uptrend intact ahead of ECB as markets brace for 25bp rate hike

That is probably the most important question for EUR/USD.

A Reuters poll published last week showed economists broadly expecting today’s 25-basis-point hike to 2.50%, but with most forecasting that this would be the final increase in the current cycle. Eurozone growth is expected to remain relatively soft, while wage pressures have moderated, reducing the risk of another sustained wage-price spiral.

However, the balance of risks has shifted toward a more hawkish stance as the Middle East conflict has intensified.

Deutsche Bank, for example, now expects another 25-basis-point ECB hike in December, taking the potential terminal deposit rate to 2.75%, arguing that persistent energy-related inflation risks could require tighter monetary policy for longer.

This distinction matters for EUR/USD.

If Lagarde signals that 2.50% may be the peak, the euro could struggle to extend its recent gains, as today’s hike is already heavily discounted.

Conversely, language suggesting that the Governing Council remains prepared to hike again, particularly if energy inflation feeds into underlying prices, would encourage markets to price a higher ECB terminal rate, providing a potential positive catalyst for EUR/USD.