EUR weaker if the ECB gets it right but disappointment a risk - BofA

Bank of American on tomorrow's ECB decision

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 €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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