EUR's Swift Rebound Loses Momentum 🎢

Barclays has noted that while the EUR has rebounded faster than they previously predicted, its momentum seems to have slowed down in recent weeks. Influences such as 1- the Fed's pause, 2- a positive boost from lower energy prices, and 3- potential unwanted US fiscal tightening due to the debt-ceiling impasse could lead to faster convergence to fair value (approximately 1.12-1.15).

ECB's Step-Down Hike Increment Not Impacting Terminal Rate 🎯

According to Barclays, the ECB's recent move to reduce its hike increment to 25bp does little to change the estimated terminal rate, which currently stands at around 3.75%. This suggests that the current pricing may be undervaluing the ECB's policy stance.