The ECB's doves now have strong grounds to argue for rate cuts, given the advanced disinflation, crumbling recovery, and low consumer confidence faced by the eurozone.
Despite services inflation still being at 4.0%, the contraction in monthly prices indicates a cooling momentum, challenging the hawks’ argument for a pause in rate adjustments.
The risks to the bullish EUR/USD stance have increased due to the convergence of the Fed and ECB implied rate paths, shifting the dovish outlook toward the ECB.
With the current macroeconomic indicators suggesting restrictive policies are too tight, the call for consecutive rate cuts has become increasingly likely as inflation trends continue.
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