The European Central Bank\u2019s Sintra forum runs from today to Wednesday, and the market focus is on whether President Christine Lagarde uses her opening remarks to adjust the policy message ahead of June CPI. ING\u2019s macro view points to inflation landing slightly above consensus, at 3.1% headline and 2.6% core, a combination that would indicate a stalling disinflation trend without easing pressure on the ECB\u2019s reaction function. Against that backdrop, the bank\u2019s baseline remains for another ECB rate rise in September.<\/p>\n\n
Foreign exchange pricing is framed as a balance between any renewed US dollar strength and the support a hawkish tone at Sintra can lend the single currency. In that scenario, ING sees EUR\/USD downside limited to 1.130, with a gradual move back towards 1.150 in July. The forum is not expected to deliver a dovish tilt before Wednesday\u2019s CPI print, leaving the policy bias intact into the data.<\/p>\n\n
With the European Central Bank’s Sintra forum running this week, we do not expect President Lagarde to signal any dovish policy shifts. The focus will be on the upcoming June inflation numbers, which will guide the ECB’s next move. Therefore, we anticipate a broadly hawkish tone will be maintained to keep markets prepared for higher rates for longer.<\/p>\n\n
Our macro team sees Eurozone headline inflation coming in at 3.1% and core at 2.6%, slightly above consensus forecasts. This would follow May\u2019s concerning print of 2.8%, suggesting that the disinflationary trend is stalling and will prevent the ECB from easing its guard. This stubborn inflation supports our view that the ECB will keep the possibility of another rate hike on the table for September.<\/p>\n\n
The clear preference from ECB speakers will be to manage inflation expectations by leaning hawkishly. This stance should provide a floor for the Euro against the dollar. We see any downside for the EUR\/USD pair as limited to the 1.1300 level.<\/p>\n\n
For derivative traders, this outlook suggests buying EUR\/USD call options with a strike price targeting a gradual recovery towards 1.150 in July. The recent strong US jobs report, with over 250,000 jobs added last month, still poses a risk of dollar strength. This risk can be managed by purchasing protective put options or setting tight stop-losses on any long positions.<\/p>\n\n
Given the expected support at the 1.130 level, another strategy is to consider selling out-of-the-money put options with a strike below that price. This position allows traders to collect premium, based on our conviction that a hawkish ECB will prevent the currency pair from breaking significantly lower. Historically, the Sintra forum has been used to signal major policy intentions, as seen in 2022, making this week critical for market direction.<\/p>\n\n\n\n