In their preview, ING expects the ECB to hike rates by 25 bps tomorrow and leave the door open for a 50 bps rate increase in September. Here's their crib sheet going into tomorrow's policy decision:


As for the euro, they see that:

"There is no doubt that the ECB is unhappy with the recent weakness of the euro – not only against the dollar, but on a trade-weighted basis. Recent hawkish surprises by the ECB have, however, failed to offer sustained support to the euro, and we suspect that a larger-than-expected move (a 50bp rate hike) or more hawkish-than-expected forward-looking language may fail to generate enough lift to the euro.

"This is especially due to the mounting downside risks in the eurozone, mostly related to the threat of a gas supply crunch in the coming months (or during winter) and more recently about Italy falling back into political uncertainty.

"Our base case for EUR/USD is that it can re-test parity this week – with the ECB potentially being a trigger – and that it may only come back to levels above 1.0300 once the dollar loses some momentum (which would require some stabilisation in risk sentiment) and markets feel somewhat comfortable with the magnitude of the economic downturn priced into European assets."