Economists at ING expect the European Central Bank (ECB) to retain maximum flexibility at its March meeting. While this is a largely priced-in scenario, it would leave the euro vulnerable to the adverse exposure to the conflict in Ukraine and high energy prices.
Euro to remain vulnerable
“When it comes to the ECB impact, we think markets have already priced in a cautious tone by President Christine Lagarde this week, and we do not expect a material negative impact on the EUR after the policy announcement.”
“Russia’s threat to stop the gas supply to Europe is currently adding to the downside risks that the euro is facing due to its proximity to the conflict and already elevated commodity prices.”
“A move to the 1.0640, 2020 lows, is a possibility in the near-term.”
