ECB: Inflation risks shifting higher into 2028 – Nomura

💡 DMK Insight

Nomura’s forecast of Euro area HICP inflation staying at 2.0% until 2027 is a crucial signal for traders: it suggests stability in monetary policy and potential impacts on the euro and bond markets. If inflation remains anchored at this target, the European Central Bank (ECB) might maintain its current interest rate stance, which could support the euro against other currencies. However, the warning of upside risks in 2027-2028 indicates that traders should be prepared for volatility as inflationary pressures could lead to a shift in ECB policy. This is particularly relevant for forex traders looking at EUR/USD pairs, where any deviation from this forecast could create trading opportunities. Keep an eye on upcoming economic data releases and central bank communications, as they could provide clues on whether the ECB will adjust its stance sooner than expected. Watch for key levels around 1.10 for EUR/USD; a break above could signal bullish momentum, while a drop below could indicate bearish sentiment. The real story is that while the near-term outlook seems stable, the potential for inflation to rise later could lead to significant shifts in market dynamics, so stay alert for any signs of change.