ING’s Francesco Pesole expects the European Central Bank’s Sintra forum to maintain a broadly hawkish stance, with President Lagarde unlikely to signal a dovish shift ahead of June CPI. Their macro team forecasts slightly above-consensus inflation, supporting another ECB hike in September, and they see EUR/USD downside limited to 1.130 with a gradual recovery toward 1.150 in July.
"The European Central Bank's Sintra forum runs from today to Wednesday. While it has at times been used to signal shifts in stance, we do not expect President Christine Lagarde to do so in today’s opening remarks."
"Our macro team looks for slightly above-consensus inflation at 3.1% headline and 2.6% core. That would point to a stalling trend, but not one that allows the ECB to ease its guard."
"The preference emerging from the many ECB speakers this week may well be to keep markets leaning toward a hawkish bias so that inflation expectations remain in check. Our call is another hike in September."
"EUR/USD still faces downside risks from any new USD bull revamp, but a broadly hawkish tone in Sintra can offer some help on the margin. We remain of the view that the downside can be limited to 1.130, and that we’ll start to see a gradual recovery towards 1.150 in July."
"Elsewhere, we don’t expect the Sintra forum to deliver any dovish tilt by the ECB ahead of a key CPI test on Wednesday. We still expect EUR/USD to climb back to 1.150 in July."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)