HSBC’s report discusses the European Central Bank’s decision to keep its key deposit rate at 2% and its implications for the euro. The report highlights that external developments and fiscal measures are expected to play a greater role in influencing the euro’s direction in 2026, given the ECB’s stable policy stance.
Steady ECB policy influences euro outlook
“The ECB’s updated forecasts were optimistic, with growth forecasts raised to 1.2% for 2026 and 1.4% for 2027 (from its September forecast of 1.0% and 1.3% respectively) with inflation expected to decline only modestly over the next two years.”
“Our economists expect the ECB to maintain its current policy stance until 2026, with a possible interest rate increase in 2027.”
“Given this policy stability, developments in other major economies are likely to have a greater impact on the euro’s direction. The euro may also face headwinds if regional fiscal measures fall short of expectations or if external conditions become less supportive.”
