Or should I more rightly say, what I think the market is thinking.
As Jamie mentioned earlier, a lot will hinge on the wording of the ECB statement with use of the term ‘strong vigilance’ taken to mean that the next hike will be in June.
The market seems to be pricing in two further rate hikes this year, one in July and another in November. The ECB has given some indication in recent times that it’s becoming more concerned about entrenched rather than short-term inflation. Depending on their internal projections for inflation, they will change or leave their language.
Therefore ‘strong vigilance’ would surprise the market in my view and perhaps send EUR/USD up to test 1.4950. ‘Vigilance’ is expected so we might see a brief flurry of profit taking on EUR longs before the dip-buyers take control again.
