ECB's Hawkish Shift Disappoints Market Expectations for Euro
The European Central Bank (ECB) delivered its second interest rate hike of the year on Thursday, raising inflation projections above 2%. This hawkish shift has led economists to believe that another rate hike is likely in December.
However, despite these expectations, the EUR/USD pair retreated as markets now price almost two further hikes by year-end and an additional 40 basis points by mid-2027. Commerzbank expects these expectations to ultimately be disappointed.
The ECB's rate hike was anticipated, but the forecasts were slightly higher than expected, leading economists to interpret this as a sign of another interest rate hike in December. The press conference initially helped the euro recover its initial losses, but this recovery was short-lived, and EUR/USD is now trading lower again.