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Oct 10 - 06:55 PM

Nordea: Risks Lean Toward a Slightly Hawkish Reaction to Next Week's ECB Meeting

By eFXdata  —  Oct 10 - 03:00 PM

Synopsis:

Nordea suggests that the upcoming ECB meeting may trigger a slightly hawkish initial reaction from the market, as current pricing anticipates 25bp rate cuts in the near future.

Key Points:

  • Financial markets have largely priced in 25bp cuts at the next two ECB meetings, indicating that a cut in October is already anticipated.
  • The ECB is likely to avoid indicating a willingness to implement larger cuts at this stage, potentially leading to a more cautious approach.
  • There is a possibility that more hawkish members of the Governing Council may seek a commitment to a more open-minded statement about future policy adjustments in exchange for their support for the rate cut.
  • Recent data releases, such as the September PMIs, show significant upward revisions, challenging the perception of a uniformly negative economic outlook, particularly in services inflation.

Conclusion:

Overall, while the market expects cuts from the ECB, the possibility of a hawkish tone could create volatility, particularly if the central bank hints at a more flexible future policy approach.

Source:
Nordea Research/Market Commentary

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