Citi discusses its expectations for the trajectory of BoC and ECB policy throughout 2020.
"Citi analysts base case is for a rebound in temporarily weak Canadian data in coming months to keep BoC rates unchanged. That said, market pricing of the probability of a BoC rate cut at upcoming meetings has increased following BoC’s surprising dovish turn at its most recent meeting with Canadian short rates now pricing 35bp of cuts by year-end," Citi notes.
"Fundamentals are supportive for euro but ignored for now as Coronavirus takes center stage - surge in German business confidence with January services and manufacturing PMIs rising and well exceeding expectations, is reassuring especially as the IFO survey also German manufacturing may be starting to stabilize. Meanwhile, Citi analysts maintain their outlook for no further ECB rate cuts while FX flows also show last week’s drop is more from stops than adding of shorts," Citi adds.