EUR: Weaker If The ECB Gets It Right But Disappointment Is A Risk – BofA

What is the outlook for EUR/USD, given the ECB policy meeting later on Thursday?

Here is their view, courtesy of eFXdata:

Bank of America Global Research discusses its expectations for tomorrow’s ECB policy meeting.

“This is an important  European Central Bank (ECB)  meeting in our view and we are concerned that investors are  not focusing enough  on it.  We would expect the ECB  to  clarify what  it  means by  “favorable financing conditions“  and defend them following the recent rates sell-off. A rate cut is a risk, although not our preferred solution.  The forecast update is complex given opposing forces,” BofA notes.  

In rates, we expect the ECB to push back on front-end pricing  and remain  long Dec21  â‚¬STR.  In FX, we see a weaker EUR if the ECB gets it right, but disappointment is a risk.  We remain bearish EURUSD for the rest of the year  and are tactically long EURUSD vol,” BofA adds.  

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