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Traders weigh ECB guidance, US-Iran risks in rate outlook

Markets are focusing on the possibility of an ECB September hike and whether geopolitical tension could prompt a surprise Fed move at the July meeting.

Reported · Written up by our desk · Central Banks

Forexlive said this week’s calendar has been light on major data releases and central bank events, with the European Central Bank leaving policy unchanged after its rate decision. The ECB also offered limited forward guidance, but indicated a September rate hike if the inflation outlook deteriorates.

With fewer domestic catalysts, the outlet pointed to the US-Iran war as a key driver of market expectations, pushing oil prices higher and raising new risks such as potential disruptions in the Red Sea and the possibility of increased US military pressure.

Forexlive added that some traders are also worried the Fed could surprise with a rate hike at its July meeting if conditions in the Middle East do not improve, though it described that probability as low. It warned that if such a decision were made, it could lead to significant market pain.

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