Image: ECB, Felix Schmidt.
The market isn't convinced the European Central Bank will dodge raising interest rates.
The euro rises against the dollar in the wake of Thursday's ECB decision that saw it keep interest rates steady, but fail to convince that it can avoid hiking them altogether in the coming months.
Following the decision and press conference, money markets see 72 basis points of ECB hikes this year, a hairline lower than the 76bp seen ahead of the decision.
Bottom line: ECB communication did not douse rate hike bets, and, on balance, that's supportive of the euro.
Euro-dollar rises 0.20% to 1.1700 as we move past the event in Frankfurt. To be sure, that's not a massive move and there's probably an element of geopolitical headline watching there too. (We've seen oil prices fall back from earlier highs, and that's always a good thing for the euro.)
Oil prices are still hovering around the year's highs, and that spells higher inflation rates than the ECB would have liked.
To be sure, the ECB says it's well placed to encounter this latest energy shock, and that should allow it to raise rates.
"A rate hike was also discussed today," said ECB President Christine Lagarde in her press conference. That's a 'hawkish' admission in her part and underpins money market bets that rates will rise.
"We are certainly moving away from our baseline," she says, referencing the rise in inflation and short-term inflation expectations.
