EUR/USD backslides as ECB headlines stoke ECB rate cut bets.
Europe sees GDP figures on Wednesday ahead of US Fed rate call.
Markets bet on ECB rate cut in April.
EUR/USD fell to its lowest bids since mid-December, testing the 1.0800 handle after European Central Bank (ECB) officials left the doors wide open for rate cuts much earlier than investors had previously anticipated.
Europe delivers a round of Gross Domestic Product (GDP) figures on Tuesday, headlined by pan-European GDP growth for the fourth quarter at 10:00 GMT. The US Federal Reserve’s (Fed) latest rate call is slated for Wednesday, to be followed by a Federal Open Market Committee (FOMC) press conference half an hour after the Fed’s monetary policy statement.
Daily digest market movers: EUR/USD sheds weight after ECB officials spark early rate cut hopes
EUR/USD slipped further back on Monday after ECB board member and Banco de Portugal Governor Mário Centeno sparked rate cut hopes.
ECB’s Centeno suggested the ECB should cut rates sooner rather than later to head off the possibility of European inflation declining too far below the ECB’s 2% target.
ECB Centeno shrugged off the idea of the ECB waiting for first-quarter wage growth figures before punching the rate cut button, claiming there are no second-round inflation effects of wage increases.
ECB board member Centeno is not in the ECB Governing Council vote rotation until March.
Money markets have fully priced in a first rate trim from the ECB of 25 basis points in April.
Rate swaps expect 149 basis points in ECB rate cuts through the end of the year.
ECB policymaker and Slovakian central bank chief Peter Kazimir quickly followed Centeno, stating that a June rate cut is far more likely than April.
ECB’s Kazimir pulled in the reins, claiming that rate cut talk remains ‘premature’, but agreed the top of the rate hike cycle has peaked and the ECB’s next move will be a cut, but only when appropriate.
ECB Vice-President Luis de Guindos followed up by agreeing that inflationary risks are on the downside but reiterated that the ECB’s policies will reflect available data.
Fed Chairman Jerome Powell is expected to deliver language on Wednesday that corroborates money market bets of a benchmark rate cut in May.
Rate swaps are pricing in nearly a 90% chance of at least 25 basis points off the top from the Fed before June
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