Economists at Commerzbank analyze ECB policy outlook and its implications for the EUR/USD pair.
If no more steps are required there are no reasons to extrapolate yesterday’s EUR weakness
The Italian government is already voicing furious criticism of the ECB rate hikes. However, we know that on the ECB board, the monetary policy ideas are extremely tightly correlated with the home countries of the board members. While that is the case, we have to fear that these political preferences could potentially affect monetary policy decisions.
That is not an issue for the next one or two ECB rate hikes. They can be implemented against the criticism of the Italian Prime Minister. If that is it and no more steps are required there are no reasons to extrapolate yesterday’s EUR weakness.
However, the Euro might suffer more sustainably if we have to fear that more painful rate hikes might soon become necessary.
