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