Antonio Del Favero
Summary The ECB delivered a 25bp hike as expected, but the hawkish bias was clear. Revised core inflation higher, with risks skewed to the upside. Robust-across-scenarios framing. No peak language. Forecasts were conditioned on rates already 75bp above pre-cycle levels. This leaves further tightening on the table, barring a collapse in oil prices. Market Implications […]
Antonio Del Favero
Summary Oil and SoH drive rates, not central banks: Short-end rates (EUR, GBP, AUD, NZD) are currently tightly linked to oil prices, which depend on the Strait of Hormuz (SOH) situation. Oil up, short-end rates up, and vice versa. There is an oil price level where the short end can disconnect from the oil price, […]
Antonio Del Favero
Summary Hold in April, hike in June — the modal path. My preference is back-to-back June/July moves, but it is too early to be sure. Stagflationary risks: growth softer than expected, inflation at the top of the baseline range and set to push higher in May as core rebounds. ECB 1Y and 3Y CPI expectations […]
Antonio Del Favero
Summary The ECB kept the policy rate unchanged at 2% (unanimous decision). Guidance remained the same. President Lagarde used a balanced tone and said repeatedly that the ECB is calm, determined, and well-positioned to deal with this shock. The Governing Council noted it will have a material impact on near-term inflation, and its medium-term implications […]
Antonio Del Favero
Summary We expect the ECB to keep rates unchanged, maintaining existing forward guidance and a data-dependent, meeting-by-meeting approach. We think the ECB will signal particular attention to second-round effects and will place relatively more weight on upside inflation risks. We expect March projections to imply slightly weaker growth and higher near-term inflation. We think the […]
Antonio Del Favero
Summary Bank of England (BoE) BoE to leave rates unchanged at 3.75%. It is a very close call, but we think a 6-3 vote is slightly more likely than 7-2. We expect the guidance in the statement to remain largely unchanged. We see some dovish risks in this meeting, but we think the BoE will […]
Henry Occleston
Summary The ECB cut 25bp as expected. The presser was more hawkish, especially around comments that they are ‘in a good place’ after the cut. This and the updated dovish forecasts suggests room for the economy to outperform, further quashing need for another cut. However, we are wary that their assumptions on tariffs look optimistic. […]
Henry Occleston
Summary The ECB will likely cut rates by 25bp this week given trade tensions and the recent CPI miss. While the doves will hold the reins near term, pushbacks should begin to grow. Updated medium-term forecasts must contend with low productivity growth, labour market tightness and rising fiscal spending. We do not think the ECB […]
Henry Occleston
Summary We expect the ECB will cut 25bp this week, in line with consensus. For now, tariffs are dominating all else. In our view, the hawks are overly sanguine about inflation returning sustainably to target. However, hawkishness may not gain traction near-term given tariff fears and suppressed energy prices. The labour market continues to tighten […]
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 […]
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