Markets are pricing a 6bp chance of a European Central Bank (ECB) rate rise on 30 April, with about 55bp of hikes still priced in by year-end. June and September are the main dates priced for increases, and a July move after a June rise is about 50% priced.<\/p>\n
Tightening expectations are expected to stay above 50bp unless the ECB gives explicit dovish signals, even if oil prices fall further. Energy price uncertainty is one reason markets see limited evidence for action by late April.<\/p>\n
Based on this pricing, the euro is positioned more favourably than other low-yield currencies such as the Japanese yen (JPY) and Swiss franc (CHF). EUR\/USD is expected to stabilise around, or slightly below, 1.1700.<\/p>\n
The market is now pricing in just 8 basis points for a European Central Bank rate hike at the April 27th meeting, showing very little conviction for immediate action. This likely reflects the view that the ECB will want more evidence before moving. The ongoing uncertainty around global energy supplies gives them another reason to pause.<\/p>\n
However, June and July now look like the most probable times for the ECB to begin tightening policy. Derivative markets are still showing over 60 basis points of tightening priced in by the end of this year. This tells us that traders believe a rate hike is simply delayed, not cancelled.<\/p>\n
What matters is how sticky these rate hike expectations are, and recent data suggests they will hold. Eurozone inflation in March came in at 2.8%, which will keep pressure on the central bank. We saw a similar dynamic in 2025 when the market’s dovish bets were consistently proven wrong by stubborn inflation data.<\/p>\n
This backdrop leaves the euro well-placed to outperform other low-yielders like the Japanese yen and the Swiss franc. The Bank of Japan remains committed to its ultra-loose policy, and the Swiss National Bank has signaled a peak in its own hiking cycle. This policy divergence makes holding euros more attractive than holding yen or francs.<\/p>\n
For the EUR\/USD pair, we look for some stabilisation around or slightly below the 1.0850 level for now. A good deal of the ECB’s expected hawkishness is already factored into the current price. Any further upside will require either surprisingly strong European economic data or a dovish turn from the US Federal Reserve.<\/p>\n
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