"We doubt the announcement will provide EUR-USD with a significant boost unless the bank surprises on the hawkish side" - UniCredit.

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The European Central Bank will be the highlight of the day for foreign exchange markets and analysts at UniCredit Bank have given their predictions for where the Euro-Dollar exchange rate might land.

Members of the ECB have over recent weeks stressed the need to start raising interest rates in July, with President Christine Lagarde saying this would most likely be followed by a September hike.

"For this reason, we doubt the announcement will provide EUR-USD with a significant boost unless the bank surprises on the hawkish side," says Roberto Mialich, FX Strategist with UniCredit in Milan.

Analysts are largely of the view that a 'hawkish' surprise would involve the ECB signalling they are open to a 50 basis point hike at one of the upcoming meetings.

"If it wasn't for self-imposed constraints & poor guidance it would be a no brainer for ECB to hike 25bps today (still should in my opinion). But a 50bps July hike is fast becoming consensus. ECB has to front-load tightening this summer. 100bps by September can't be ruled out," says Viraj Patel, Macro Strategist at Vanda Research.

The Euro to Dollar exchange rate has risen over recent days as investors price in higher interest rates in the Eurozone, going as high as 1.0751 already this week.

Under a 'hawkish' outcome UniCredit says Euro-Dollar could be "set to climb back above 1.08 and towards the 25 April high of 1.0841 at least".

But there is also the potential the ECB does not meet hawkish expectations and some of the recent gains made by the Eurozone's single currency are reversed.

"Given the cushion to the downside EUR-USD has managed to build in the past few weeks, we doubt that any sell-the-fact reaction following the meeting this week will put the recent recovery of the euro under threat with a renewed break below 1.06," says Mialich.

On the all important issue of preventing financial market stress - a potential outcome of rapidly rising central bank interest rates - UniCredit are wary.

"Any reference to new facilities aimed at limiting bond market stress, as reported in the press earlier this week, might make EUR-USD a bit more nervous in the aftermath of Ms. Lagarde’s press conference, but on balance we expect the pair to keep a steady-to-firmer tone, further consolidating above 1.07 ahead of US CPI inflation data tomorrow," says Mialich. (Set your FX rate alert here).

Brent Donnelly, CEO of Spectra Markets, says the wildcard for markets is whether the ECB can credibly signal some kind of plan to backstop the 'periphery' with an anti-fragmentation tool.

In essence the ECB would want to avoid the massive headache caused if Italy/Greek bond yields (periphery Eurozone countries) shot higher relative to those of France and Germany (core countries).

"I am skeptical that anything will come of this. It’s worth considering that a large rate hike with a credible anti-fragmentation tool would be massively bullish EUR but I don’t think we are anywhere close to that yet, despite this FT article last week. I am keeping the EUR short through ECB," says Donnelly.

The ECB decision is due at 12:45 BST with the press conference due at 13:30.