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Goldman Sachs pushes back timing of ECB rate hikes for this year by a little

The revised call comes as we are also starting to see ECB policymakers preach more patience rather than taking a more proactive step come later this month. Goldman Sachs had previously forecast the ECB to raise key interest rates in April and June but have now pushed back that timeline by just a little bit.The firm now expects the central bank to deliver on those rate hikes in June and September instead. On the call, they note that:”We expect energy prices to remain persistently high through 2026. A significant passthrough into inflation is likely in the coming months and the ECB’s communication has remained largely hawkish on the path ahead.”As mentioned earlier, traders are just pricing in ~20% odds of a rate hike for the April meeting for now. But come the June meeting, those odds jump up by quite a margin to ~81% at the moment. For this year, traders are pricing in ~56 bps of rate hikes by the ECB currently.
This article was written by Justin Low at investinglive.com.

๐Ÿ”— Source

๐Ÿ’ก DMK Insight

The ECB’s shift towards patience is a game changer for traders: it signals a potential delay in rate hikes, impacting euro volatility. Goldman Sachs’ revised forecast pushes back expectations for interest rate increases, which could lead to a weaker euro in the short term. Traders should watch the euro’s response against the dollar, especially if the ECB maintains a dovish stance. This could create opportunities for short positions on EUR/USD, particularly if it breaks below key support levels. The broader market context suggests that if the ECB continues to signal caution, we might see a ripple effect across European equities and bond markets as well. Keep an eye on upcoming ECB meetings and any comments from policymakers that might hint at future monetary policy direction, as these will be crucial for positioning. The flip side is that if inflation data surprises to the upside, the ECB might have to pivot quickly, catching traders off guard. So, stay alert for any economic indicators that could shift the narrative back towards tightening.

๐Ÿ“ฎ Takeaway

Watch for ECB comments and euro movements; a break below key support could signal shorting opportunities on EUR/USD.

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