John Fahey: Global uncertainty means currency trading will remain volatile 

While the ECB maintains a willingness to cut rates again if warranted, the direction of monetary policy has become less clear

ECB president Christine Lagarde says that regarding interest rates, “if the data points to a pause, we will pause, if the data points to a cut, we will cut”.

While global trade and fiscal policies were very much front and centre of market discourse and action last week, there were also important developments in relation to monetary policy. Specifically, the European Central Bank cut rates by 25 basis points (0.25%) at its March governing council meeting, lowering the deposit rate to 2.50%.

With the rate cut fully priced in by markets, the key point of interest for investors was what guidance, if any, would be forthcoming from the ECB on the future path of official rates? In this regard, the meeting statement continued to emphasise that the central bank will follow a “data-dependent” approach. However, there was a significant change to the statement, with the ECB now stating that “monetary policy is becoming meaningfully less restrictive”.