In a recent analysis, ING’s Francesco Pesole provided insights on the current economic landscape, particularly focusing on the European Central Bank (ECB) and the euro’s performance against the U.S. dollar. ECB President Christine Lagarde is set to address the Economic and Monetary Affairs (ECON) Committee of the European Parliament, where her remarks will be closely monitored by market participants. Lagarde has previously highlighted the need for “agile” decision-making regarding monetary policy, yet Pesole emphasizes that the existing data does not support any significant changes in rate expectations for the foreseeable future.
Current market conditions suggest that traders are pricing in flat ECB rates for the entirety of 2026. This assessment comes amidst anticipation of the upcoming Consumer Price Index (CPI) data, which analysts believe is unlikely to shift the prevailing expectations regarding interest rates. In the context of ongoing discussions about inflation and economic growth, the CPI will be scrutinized, but its impact on rate forecasts is expected to be minimal.
Moreover, Pesole points out that the short-term interest rate differential between the euro and the dollar remains unfavorable for the euro-to-dollar exchange rate, which adds pressure on EUR/USD. Despite these headwinds, he maintains that 1.1750 represents a robust support level for the euro, provided there is no significant escalation in geopolitical tensions, particularly concerning Iran.
In summary, while the market eagerly awaits Lagarde’s address, the current economic indicators point towards stability in ECB rates, with limited potential for immediate shifts in the euro against the dollar.
