Swissquote Bank: ECB could start cutting its rates before the Fed

Swissquote Bank: ECB could start cutting its rates before the Fed

1 maart 2024

Monetair beleid
Geld dollar euro (03)

The US economy is doing significantly better than the Eurozone’s. That’s why the ECB is expected to cut more than the Fed this year.

Yesterday’s inflation report from the US wasn’t worse than expected, Swissquote Bank reports today. ‘The core PCE index showed that, the monthly inflation rose at the highest pace in a year, but that the yearly figure eased from 2.9% to 2.8%. Both figures matched market expectations. As such, yesterday’s data hinted at inflation uptick in January, but the data came as a relief for those who were prepared for the worst. A soft jobless claims figure also helped cooling the hawkish Fed worries. That’s why the S&P500, Nasdaq and Russell 2000 rebounded yesterday.’

‘In Europe, the inflation heatmap was mixed. Inflation in Germany slowed more than expected, Spanish and French figures were slightly higher than expected, but still, French inflation fell to the weakest level since September 2021. Combined with the weak economic outlook in the region, the latest inflation prints revived the expectations that the ECB could start cutting its rates before the Fed. The EURUSD slipped below the 100 and 200-DMA, fundamentals back a further depreciation of the euro against the greenback provided the diverging strength of the underlying economies – which by the way is not only due to the fact that the Americans are so strong that they can defy whatever rate hikes the Fed throws at them, but it’s partly because the US government spends at a furious speed, whereas the euro-area economies have a better budget discipline! But whatever it is, the US economy is doing significantly better than the Eurozone’s. That’s why the ECB is expected to cut more than the Fed this year. Although not many see the ECB start cutting rates before the Fed.

In Japan, the policymakers are not in a hurry to hike their rates. A BoJ board member’s words that the BoJ could be approaching the end of the negative rates had sent the USDJPY below the 150 level earlier this week along with a stronger than expected BoJ core PCE report, remember? Well, the Governor Ueda came to spoil the BoJ hawks’ trade by saying that their price target is not yet in sight, and that they will ‘continue to seek confirmation whether the virtuous cycle between wages and price began to turn’. The USDJPY is back above the 150, but can probably not go further up because traders fear a direct FX intervention from the Japanese authorities to prevent the yen from losing too much value. Nikkei 225 hit a fresh record.’

 

Gerelateerde berichten