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The bandwagon is starting to grow, with the two latest calls adding to the one from JP Morgan earlier here. And much like JP Morgan, both Barclays and Morgan Stanley had previously forecast no rate changes by the ECB for the year. And amid the latest developments in the Middle East and higher energy prices, they are revising their respective calls.Barclays also sees two rate hikes by the ECB now, with the first one to come in April. They then expect the central bank to deliver the second one in June.As for Morgan Stanley, they are seeing a bit of a later timeline for the ECB rate hikes. The first one is penciled in for June and the next one being in September this year. And much like JP Morgan, they see the ECB pivoting back to rate cuts again at some point next year too:”Faced with lower growth, we think the ECB will likely cut rates again in June and September 2027 to 2%, bringing rates back to neutral territory.”At the same time, Morgan Stanley also revises their call for the BOE outlook as well. The firm previously expected the BOE to cut rates twice this year (April and November) but now see the central bank staying on hold throughout the whole of 2026.
This article was written by Justin Low at investinglive.com.
💡 DMK Insight
The growing consensus among major banks like JP Morgan, Barclays, and Morgan Stanley about the ECB’s rate stability is crucial for traders right now. This signals a potential shift in monetary policy expectations, which could influence the euro’s strength against the dollar and other currencies. If the ECB maintains its current rates, it may lead to a stronger euro, impacting forex pairs like EUR/USD. Traders should keep an eye on upcoming ECB meetings and any economic data releases that could sway these forecasts. However, there’s a flip side to this optimism. If inflation data surprises to the upside, the ECB might be forced to reconsider its stance, leading to volatility in the euro and related assets. This uncertainty could create trading opportunities for those prepared to act quickly. Watch for key support and resistance levels in the EUR/USD pair, particularly around recent highs, as these could indicate market sentiment shifts. The next few weeks will be critical for gauging the ECB’s direction and its impact on the broader forex market.
📮 Takeaway
Monitor the ECB’s upcoming meetings and inflation data closely; a surprise could lead to significant volatility in the euro and related forex pairs.
