ECB Rate Hike Unlikely to Spark Euro Rally

The European Central Bank (ECB) is expected to raise interest rates by 25 basis points this week, in line with current market pricing and Citi Economics forecasts.

This move is already fully priced into overnight indexed swaps at 25.1 basis points, suggesting that the rate increase alone will not trigger a significant reaction in the foreign exchange market.

Citi notes that despite the potential for upward inflation revisions, a hawkish delivery may have limited impact on EUR/USD due to already reflected expectations of further hikes.