A Reuters poll found that most economists expect the European Central Bank to raise the deposit rate by 25 basis points to 2.25% in June. In the poll, 59 of 70 economists forecast this move, compared with 44 of 85 in an April survey.
The same poll found expectations for further rises in 2026. It showed 37 of 70 economists expect the deposit rate to be raised at least twice in 2026, compared with 34 of 85 in the April poll.
Looking back at this poll from last year, we can see it correctly anticipated the 25 basis point hike in June 2025. That move brought the deposit rate to 2.25%, establishing a tightening cycle that continues to define our market. This historical accuracy gives weight to its longer-term predictions.
The forecast for at least two hikes in 2026 is now our immediate focus. The ECB already delivered one 25 basis point increase to 2.50% this past March. Therefore, we are actively positioning for the second hike which the market expects will come this summer.
Recent data supports this view, with the latest Eurostat flash estimate showing core inflation for the Eurozone holding at a stubborn 2.7% in April. Market pricing reflects this, with Euribor futures contracts for July 2026 implying a greater than 90% probability of another rate increase by that meeting. This leaves little room for the ECB to pause without surprising the market.
For those trading interest rate derivatives, the straightforward bet on a hike is already expensive. The better strategy is to focus on volatility, as the exact timing of the next move and the tone of the ECB’s statement are still uncertain. We see value in buying options like straddles on short-term rate futures to profit from any surprise in the central bank’s announcement.
In the currency markets, this ECB trajectory continues to diverge from the Federal Reserve, which has signaled a longer pause. This policy difference has been a primary driver of euro strength. We believe traders should consider buying EUR/USD call options to capitalize on potential further upside for the single currency through the summer.
