Summary

• The ECB meets tomorrow, and a hawkish hold remains the most likely scenario. There is roughly a 10% chance of a hike priced in for this meeting. June is fully discounted for a quarter-point move.
• The region remains acutely sensitive to imported energy costs, and the second-round effects - while not yet evident in the data - are a key risk the ECB cannot dismiss.
• The technical picture for the euro has turned more cautious. It peaked near $1.1850 on April 17 and has since reversed lower. The initial target in the $1.1675-1.1700 area was met, but selling pressure did not look exhausted. Momentum indicators point to scope for additional losses.

The euro fell nearly 1.65% in Q1, only to claw back about 1.25% in April. At one level, that looks like noise within a broader range. At another, it reflects a market that has been repeatedly and abruptly forced to reprice the policy outlook

17.17K Followers