A hawkish 50bps rate increase by the ECB is our base case for Thursday, but wouldn't rule out a 75bps hike following the 5% core consumer price index print for November and the 5.4% consumer price expectation one year out in the latest ECB survey.
Inflation forecasts could again be revised up, with the 2% target eluding the ECB until 2025. The bigger-than-anticipated second Targeted Longer-term Refinancing Operations repayment on Friday of 447.5 billion euros in theory ought to be bond bullish (lower yields) if it reduced pressure on the ECB to start quantitative tightening sooner.
For the EUR/USD, the GBP/USD and other major currency pairs, the direction should come down to how the US dollar and equity markets respond to US CPI and the Fed. - Société Générale
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