Ben Ford
Summary The SNB cut the policy rate by 50bps, to 0.5%. That was their fourth cut of the cycle, but their first 50bp reduction since January 2015. Underlying inflation pressures are weakening with growth proving modest. The unemployment rate is grinding higher, too. In culmination, it led to a lower inflation forecast in the near-term. […]
Henry Occleston
Summary We expect the ECB to cut 25bp on 12 December. It will also update macroeconomic projections, which are likely to see dovish revisions with inflation sustainably at target in H1 2025. We expect the ECB to avoid fully opening the way to 50bp cuts, but comments will likely add that they are flexible to […]
Richard Jones
Summary EUR/USD has bounced about 2% since bottoming out on a 1.03 handle (intra-day) last week. This has coincided with a decline in US yields across the curve. Crowded short positioning, plus oversold technicals that are starting to unwind, have also contributed to the rise in EUR/USD. Market Implications We still think EUR/USD can rally […]
Henry Occleston
Summary ECB voters have started discussing where R* is. But there is little appetite right now in discussing cutting below the neutral rate. We estimate consensus R* is around 2-2.5%, making the market pricing (1.70% in October 2025) look overly dovish. The US election outcome has driven some of this. It probably underestimates the reality […]
Henry Occleston, Caroline Grady
Summary The ECB is widely expected to cut its depo rate by another 25bps on Thursday. Below-target inflation and increasing signs of economic, and in particular labour market, weakness are why. But we expect a cautious tone given inflation is set to rise again in Q4, risks over January repricing remain, and Q2 employment growth […]
Henry Occleston
Summary The ECB seems almost certain to cut 25bp at its 17 October meeting. Post-NFP, the market has pared expectations of cuts over the next year, but it is still pricing four 25bp cuts in as many meetings. While September inflation took it below ECB forecasts, we are cautious that we may be seeing a […]
Viresh Kanabar
Summary Since our ECB monitor last month, wage data shows further slowing in Q2. This will ease ECB concerns about the risk of an overshoot given the staggered nature of the negotiated wage agreements. While Q2 GDP data was revised lower, excluding Ireland, EZ growth remains fine. Finally, inflation continued to cool in August but […]
Richard Jones
Summary As is common in August, reduced market liquidity has rendered trading conditions sub-optimal. This month has seen big moves, and sizeable retracements of those moves, across all global macro asset classes. We see these dynamics continuing for the next 1-2 weeks so keep our powder dry into September. Liquidity should improve then, and durable […]
Henry Occleston
Summary The market is fully pricing a 25bp cut in September. However, recent data suggests the ECB will need to revise their forecasts more hawkishly at the September meeting. This, and the amount of incoming data, elevates the risk of the ECB pausing in September. We therefore see good value in fading the 25bp cut […]
Henry Occleston
Summary We do not expect the ECB to change policy this week. Nor do we expect much forward guidance – the ECB is watching the data. Comments will likely emphasise every meeting is live. We think two cuts by yearend is reasonable. This week also brings the final read of the June inflation data. It […]
Henry Occleston
Summary We expect the ECB to cut twice more this year. However, within recent ECB comments on 2024 cuts, one more cut has emerged as most popular. Most important voices have yet to opine, though. The June ECB meeting minutes suggest general agreement that disinflation is underway and a broad capacity to look through bumps. […]
Henry Occleston
Summary Following the cut at their last meeting, ECB speakers mostly agree they are now in cautious data-watching mode. We assess the current data picture across services inflation, wage growth and unit profits. Inflation is trending back towards normality, but services continue to overshoot. Wage growth remains too strong, although evidence of whether this will […]
Henry Occleston
Summary We expect the ECB will cut 25bp on Thursday, but more interesting will be their forecasts and subsequent actions. We expect little change to the forecasts, with the ECB looking through recent labour market strength but providing a modestly higher profile for medium-term inflation. Services and domestic inflation will remain key, particularly if goods […]
Richard Jones
Summary This week saw a torrent of central bank rate decisions, highlighted by the Bank of Japan (BoJ) ending its negative interest rate policy (NIRP). Also, the Swiss National Bank (SNB) surprised markets by cutting rates by 25bps. The US Federal Reserve (Fed) and Bank of England (BoE) kept policy steady with comparably less fanfare, […]
Henry Occleston
Summary We expect the ECB will keep its policy rate unchanged with the deposit rate at 4.0% this week. The market expects the ECB to downwardly revise 2024 core CPI. However, given the recent uptick in core and services momentum, there is an underpriced risk that they wait before such a downgrade. Labour market tightness […]
Bilal Hafeez, Viresh Kanabar
Summary In the US, Powell’s congressional testimony (Wednesday) will likely stress the need for more good inflation data before the Fed can cut. Nonfarm payrolls and wages (Friday) are likely to surprise on the upside. In Europe, the ECB should keep rates steady on Thursday but revise forecasts. We still expect a June cut at […]
Bilal Hafeez, Viresh Kanabar
Summary In the US, the Fed meets on Wednesday. We expect them to hold rates steady while preparing markets for a cut in March. In the UK, the BoE will likely hold rates unchanged on Thursday, taking a more dovish profile in the near term. January CPI is the main release of the week for […]
Richard Jones
Summary Since last May, EUR/GBP has traded in a ~0.8500/~0.8800 range. This week, EUR/GBP printed its lowest levels since September, primarily catalysed by a hawkish pricing tilt in BoE expectations. We think this hawkish BoE pricing has gone too far and that ECB easing will be less aggressive than the market currently prices. Market Implications […]
Henry Occleston
Summary Recent ECB comments are rallying around their ability to wait until June before their first cut. Speakers are keen to push back on market pricing, fearing that too much easing will stall disinflation. This tone is likely to remain at this week’s meeting. It is unlikely to change while data suggests a gradual return […]
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