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May 15 - 02:55 PM

HSBC: ECB's Stance on Rate Cuts Amid Improved Eurozone Economic Data

By eFXdata  —  May 15 - 01:30 PM

Synopsis:

HSBC highlights that recent rhetoric from the European Central Bank (ECB) points strongly towards a rate cut in June, as corroborated by improved economic data from the Eurozone. The latest GDP figures confirm an exit from economic stagnation, supporting the potential for policy easing.

Key Points:

  • Eurozone Economic Data: The Q1 GDP for the Eurozone remained steady at +0.3% QoQ, a positive shift from the minimal growth observed over the previous five quarters. March industrial production also exceeded expectations, despite weak performances from major economies, bolstered by an unusually strong output from Ireland.
  • ECB Rhetoric: Both ECB members, Muller and Villeroy, have indicated that a rate cut in June is highly likely, with the market currently pricing in a cut of approximately 24 basis points. Villeroy emphasized that the pace of subsequent cuts would be determined on a meeting-by-meeting basis.
  • Market Expectations: Following the anticipated June cut, the likelihood of an additional cut in July is presently viewed as low, with only a 20% probability priced into the market.

Conclusion:

The alignment of supportive economic data with clear signals from ECB officials suggests that the Eurozone is poised for a rate cut in June. This anticipated monetary easing reflects the ECB's response to sustained economic improvement and may set the stage for further adjustments depending on the evolving economic landscape.

Source:
HSBC Research/Market Commentary

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