The ECB is set to begin rate hikes in July and there is no other way to skirt around that. It will mark the first rate hike by the central bank in over a decade, with most policymakers outlining a "gradual" approach to normalising policy.

That points to 25 bps increments, even if the more hawkish members are pushing for a 50 bps rate hike. The viewpoint from the latter camp hinges on the fact that inflation pressures are continuing to ramp higher across the region in Q2. That is evident from the figures that we have seen this week:

While inflation is a catalyst for the ECB to act more aggressively, it is a double-edged sword in a sense. The euro area economy is already struggling in the wake of the Russia-Ukraine conflict and elevated price pressures will only add to the burden for businesses and households in the months ahead.

The latest oil embargo on Russia will already put a slight dent on economic prospects and the only saving grace is that most European countries will not push for a gas embargo.

But when you already see sluggish GDP readings like in France today here, it begs the question; is a recession looming in Europe?

If we do get more poor economic data readings in the months ahead, it will definitely start to bring about major concerns surrounding that. In turn, that will be a serious test of the ECB's resolve as to whether they will stick with their mandate to hike rates in order to combat inflation while the economy is tanking.

The central bank's communique in that aspect is going to be key and whatever that may be, the euro's fate will depend on it.

For now, markets are still convinced that the ECB will still hike rates and get out of negative territory by September. And while money markets have continued to aggressively price in more rate hikes by the ECB after that, the economic considerations above may be something to ponder upon in the coming months.

And if we do see some backtracking by the ECB, there is little doubt the euro is going to be dragged lower as a result.