Market Insight

Daily Analysis: ECB Reaffirms Imminent Rate Cut In June

Reece Dye

Reece Dye

Head of Corporate Clients

Published Last Updated 2 min read

Our daily analysis of EUR, GBP and USD.

EUR

  • Key event yesterday was of course the ECB meeting with ECB President Christine Lagarde providing a steady message that a rate cut is still imminent once the data between now and June allows.
  • Post Wednesday’s hot CPI release, markets had started to price in a greater chance that the likes of the ECB may deviate from recent expectations of a June rate cut in line with the US Fed’s now expected hold path.
  • Key words from her statement were
    • If our updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission were to further increase our confidence that inflation is converging to our target in a sustained manner, it would be appropriate to reduce the current level of monetary policy restriction.”
    • This shows that the rate cut whilst not a pre commitment, is more than likely as long as the economic data says otherwise.
  • EUR naturally fell against the USD as monetary policy divergence becomes clearer.
    • EURUSD trading below 1.07 lows this morning with further losses potentially on the cards.

USD

  • As can be seen earlier this week, key US data releases still have the power to dominate global financial markets.
  • Looking ahead to today, we have the Michigan Consumer Sentiment Survey for April.
  • Potentially more important are scheduled speeches from various Fed member. No doubt all attention will be on any clues regarding monetary policy.

GBP

  • Earlier this morning we had UK GDP figures which showed the recovery from recession is under way. However, the recovery based on these figures are on the milder side.
    • The UK economy grew for a second month in February.
    • Gross domestic product rose 0.1% from January.
    • January’s figure was revised up to show a 0.3% increase.
  • From a FX perspective, the GDP figures couldn’t prevent sterling’s slide against the USD with cable trading down close to 1.2500.

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