The European Central Bank (ECB) announced a 25 basis point cut to its deposit rate, marking its fifth cut in the current cycle. This decision, widely anticipated, indicates a commitment to further reductions, with expectations for continued cuts unless inflation targets are sustainably met. Meanwhile, US economic data showed a 2.3% annualized growth rate, falling short of expectations, but consumer spending remains strong, suggesting continued economic resilience. This backdrop sets the stage for a busy economic week ahead with significant implications for markets.
My base case remains that the ECB deliver a 25bp cut at the next meeting in March, and likely continue cutting at that pace for the foreseeable future.
Despite another deluge of catalysts, trade was a little calmer yesterday, with participants by and large digesting developments with relative ease.
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