ING’s Francesco Pesole highlights that the European Central Bank (ECB) is likely to avoid providing firm guidance in its upcoming communications, citing recent mixed signals from global central banks as a key influence [1]. The Reserve Bank of Australia advanced a rate cut previously expected in May, the Bank of Canada is disregarding a recent inflation bump, the Federal Reserve maintained its projection for one more rate cut in 2026, and the Bank of Japan adopted a cautiously hawkish tone [1]. These developments have contributed to a 55 basis point hawkish repricing in one-year ECB rate expectations during March, but ING believes the risks for Euro rates are now on the dovish side [1].
Pesole notes that the ECB’s historical sensitivity to oil prices, especially following the inflation scares of 2022, remains relevant, but he argues that the current situation is not a repeat of 2022. He expects President Lagarde to use cautious, non-committal language similar to that of Fed Chair Powell, rather than offering explicit guidance [1]. The size of the recent repricing means that even subtle hints from the ECB could have an amplified impact on short-term rates, but ING doubts the ECB will match current market pricing with clear guidance [1].
As a result, ING sees downside risks for the euro, although foreign exchange markets have become less sensitive to rate differentials and more influenced by oil prices. The euro did not benefit from the hawkish repricing, and ING suggests it should not suffer significantly from a dovish adjustment either. Nevertheless, ING forecasts that EUR/USD could trade back close to 1.140 by the end of the week [1].
CONCLUSION
The ECB is expected to maintain a cautious stance, avoiding firm guidance amid mixed global central bank signals and lingering sensitivity to oil prices. ING sees dovish risks for Euro rates and forecasts a potential move in EUR/USD towards 1.140. Market impact is likely to be moderate, with FX markets focusing more on oil than rate differentials.