ECB Rate Hike Next Week May Trigger Downside Risks for Euro

Commerzbank's Antje Praefcke believes that the European Central Bank (ECB) will raise its key interest rate next week, following the release of Euro Area inflation data showing a year-over-year increase to 3.3% in August.

Praefcke notes that markets are fully pricing in this rate hike, but she doubts further tightening beyond September as projections show inflation declining into 2027.

She argues that EUR upside is limited and warns of an asymmetric downside reaction if the ECB signals an end to its hiking cycle.