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📝Harder For ECB to Match Market Expectations: HSBC

The euro could face renewed pressure as the Federal Reserve is more likely to deliver on the market's interest rate hike expectations than the ECB. While data showed the U.S. economy contracted and eurozone economy grew in the second quarter, details of the figures give fewer reasons to be negative on the USD, and fewer reasons to be positive about the EUR. In particular, we would highlight an ongoing split in domestic consumption, which paints a much brighter picture for the U.S. whereas the European consumer story still looks gloomy. That makes it harder for the ECB to match rate hike expectations compared to the Fed. On the dollar, we see a premature market reaction to Wednesday's softer CPI data. It will take far more evidence of slowing core inflation to temper Fed tightening, never mind deliver the priced-in rate cuts by mid-2023. - HSBC



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