Today’s ECB meeting will take centre stage in FX markets. After a hawkish turn last week, investors will be looking to see whether that gets backed up with forecast and rhetoric changes today. Examining those forecasts, the CPI profile is likely the biggest risk to the euro. In September, the ECB’s forecasts for headline and core inflation were: 2026, 1.7/1.9, and 2027, 1.8/1.9. The delay in the ETS2 carbon tax could wipe 0.2% off the 2027 headline forecast and a new 2028 CPI forecast somewhere near 1.8% could prove awkward for ECB President Christine Lagarde as she has to explain away an inflation undershoot. There will also be a focus on the growth forecasts: 25/26/27 at 1.2/1.0/1.3 and perhaps some modest upward revisions.
The above could see the short-end of the euro interest rate curve handing back some of the rise in yields seen last week. And that could prompt a brief sell-off in EUR/USD to the 1.1680/1700 area. However, as we mentioned yesterday, there are some large EUR/USD option strikes rolling off in the 1.1750/1800 area over the coming days, which could have an influence on thinning year-end markets.
Elsewhere, we have Riksbank and Norges Bank rate meetings. After September’s rate cut to 1.75%, the Riksbank is positioning itself as on hold for a prolonged period. It is probably a little too early for the Riksbank to be encouraging ideas of a hike, but the market will be focusing on the policy rate forecasts, which in September had the policy rate unchanged in 2026, but one hike each in 2027 and 2028. Any upward revision here could give the SEK a brief boost.
In Norway, the Norges Bank seems in no hurry to cut the 4.00% deposit rate. We will also see new policy rate forecasts today. In its most recent Monetary Policy Report, the Norges Bank had one cut per year between 2026-28, with the 2026 cut expected in the second quarter. The market prices 30bp of rate cuts by the May meeting, and it is hard to see the need for Norges Bank to bring that forecasted 2026 rate cut forward to the first quarter. EUR/NOK has already been rallying on the soft oil story, and we expect it to continue to meet good offers above 12.00.
And finally, let’s keep a close watch on EUR/HUF. Long forint has been one of the most popular carry trades this year. A big unwind is underway after this week’s dovish shift from the National Bank of Hungary. This may have further to run.
Chris Turner