06:12 AM EDT, 03/20/2026 (MT Newswires) -- The European Central Bank opted for a cautious tone in light of energy price volatility on Thursday, but President Christine Lagarde's press conference had a hawkish undertone as she conveyed a sense of heightened concern for upside risks to inflation, said ING.

However, even more importantly, Bloomberg later reported that ECB officials are already considering a rate hike in April should inflation rise too far above target, wrote the bank in a note.

That can be a game-changer, stated ING. Despite the recent hawkish repricing, markets were pricing in a hike only from June before Thursday. The reasoning was that the ECB would have needed a couple of months of data to assess second-round effects.

Putting April on the table -- now 15bps priced in -- means that the ECB may be ready to act aggressively and pre-emptively, intuitively raising the chances of back-to-back increases, pointed out the bank.

ING isn't ready to pencil in a rate hike yet, as a positive turn in the Iran war and energy prices can still discourage the hawks. But the chances of a hike have undoubtedly increased, which raises the upside potential for the euro (EUR) beyond the near-term impact of energy prices.

Natural gas prices have eased back after Thursday's spike, but Iran's attacks on Qatar's liquefied natural gas facilities are now estimated to cause a loss of 12.8 million tons per year, or roughly 3% of global production, for three to five years. Further EUR gains from here depend on no additional major shocks to gas supply.

ING thinks caution is very much warranted in EUR/USD at this moment, as the pair seems to be trading a bit too strongly considering where oil and gas prices are. But should the bank see some de-escalation over the weekend, EUR/USD could be eyeing 1.170 soon, backed by a hawkish ECB message.

The Bank of England surprised on the hawkish side with a 9-0 vote in favor of a hold on Thursday, as consensus was that two members would still vote for a cut, added ING. Incidentally, the MPC's most dovish member, Swati Dhingra, openly discussed a rate hike to "stabilize rate-setting dynamics" in case of a sharp rise in inflation.

The key takeaway from the statement was that the BoE is "ready to act" against an inflation spike, and markets added a "mammoth" 50bps of hikes by year-end, for a total of 70bps. While it's often the case that hikes come in couples, the bank still believes market pricing is too aggressive, considering much less favorable conditions for second-round effects relative to 2022.

The repricing of both ECB and BoE rate expectations has kept EUR/GBP relatively stable, with all the action happening in GBP/USD. Oil prices are now back in the drivers' seat, but the hawkish BoE tilt is offering some extra support.

The Czech central bank (CNB), as expected, left rates unchanged at 3.50% on Thursday, noted ING.

Markets may have seen some calming in rate hike bets after the CNB meeting. However, the reaction may have been lost in global volatility, and the bank doesn't take much away from Thursday's meeting.

EUR/CZK has been the least volatile pair in the region for now and that is likely to continue, according to ING. Foreign exchange should limit any reaction from the CNB, and the bank believes that the central bank will potentially be the last to hike rates in the Central and Eastern European region.