David McNamara: Markets pricing in 80 basis points worth of ECB cuts this year
Eurozone inflation has undershot expectations, with the hitherto German engine of the Eurozone economy now experiencing persistent disinflation, as its economy remains exceptionally weak.
While markets were largely unmoved by the ECB’s monetary policy statement last Thursday, the tone of the statement and President Lagarde’s press conference was very much a dovish one.
This subtle shift in tone is an important scene setter as the ECB nears a likely first cut in June. Market interest rate expectations were little moved following the press conference, while the subsequent weakness in the euro largely reflects broad-based dollar strengthening on the back of strong US inflation data and rising geopolitical tensions, with the euro holding ground against other major currencies.
