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Nordea analysts Tuuli Koivu and Anders Svendsen predict the European Central Bank (ECB) will initiate a new hiking cycle in June, driven by persistent inflation and a resilient labor market. They highlight that core inflation remains above target, wage growth is robust, and unemployment is at historic lows, all signaling sustained upward pressure on prices. The ECB’s policy shift could extend beyond initial expectations, with potential rate hikes in June, July, and September.
This development is critical for forex markets, particularly the EUR/USD pair, as tighter monetary policy typically strengthens the euro. Traders should monitor ECB policy statements and inflation data for clues on the pace of hikes. Higher rates may also impact European bond yields and equity valuations, creating cross-asset volatility.
For investors, the prolonged hiking cycle raises concerns about economic growth and corporate earnings. Key watchpoints include the ECB’s June meeting, upcoming inflation reports, and labor market data. A prolonged tightening could delay the ECB’s rate-cut timeline, extending the period of high borrowing costs for businesses and consumers.
