Three major central bank decisions are due, with Swiss National Bank, Bank of England, and European Central Bank all widely expected to leave policy unchanged. Markets are therefore less focused on the decisions themselves and more on the signals embedded in communication, particularly around inflation risks and policy direction amid the ongoing energy shock.
At SNB, policy is expected to remain at 0.00%, with little change in the broader outlook. A recent upward revision in inflation forecasts by SECO, to 0.4% for 2026, offers some room for policymakers, but the central issue remains currency strength. SNB is likely to reiterate that the Swiss franc remains highly valued and maintain a Firm stance on intervention, aiming to prevent further appreciation from tightening financial conditions.
At BoE, attention will center on the vote split rather than the rate decision itself. A hold at 3.75% is expected, but the anticipated 7–2 split could still surprise. Any deviation—either a more hawkish or dovish tilt—would likely trigger immediate moves in Sterling. With inflation still elevated and no clear consensus on the rate path, BoE remains a key source of short-term volatility.
ECB is likely to be the main driver of broader market direction. While a hold at 2.00% is widely expected, the key question is whether policymakers validate or push back against market pricing for rate hikes. Interest rate futures are currently pricing a hike by July and a significant probability of another by year-end, creating a clear gap between market expectations and economist forecasts.
New projections will also be critical. Growth forecasts are likely to be revised lower, reflecting stagnation risks, while inflation projections may be pushed higher due to rising energy prices. This combination raises the risk of a stagflationary backdrop, complicating policy communication and limiting the upside for Euro even in the event of a hawkish tone.
Overall, while policy decisions are largely priced in, divergence in messaging is set to drive market moves. BoE’s vote split could trigger sharp but short-lived volatility, while ECB’s guidance and projections carry greater weight for sustained direction, particularly for EUR.
