forex Rate Cut Odds Drop for ECB

[Anzo Lim 0]

Now that the ECB cut interest rates in September – meeting expectations, as overnight index swaps were discounting a 100% chance of a 10-bps rate cut – investors are quickly shifting their expectations for future policy moves. Overnight index swaps are currently pricing in a 62% chance of a 10-bps rate cut at the October ECB meeting. If not, there is a 71% chance of a second 10-bps rate cut coming at the December ECB meeting. But this is the big move: whereas last week rates markets were pricing in three 10-bps rate cuts in September and October 2019 and January 2020; after the September rate cut, rates markets now see the next cuts coming in October 2019 and July 2020. That the third rate cut has been pushed back by six months may give the Euro some room to breathe in the short-term.

 

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