EUR in Trouble with ECB's Rate Cuts Surpassing Fed Decisions
Market Adjustments: Fed vs ECB Rate Cuts
The euro may fall against the U.S. dollar if ECB rate cuts outpace those of the Fed. Stock markets are embracing a 25bps Fed interest rate cut following in-line U.S. CPI data. The upcoming ECB rate decision is under scrutiny, marking a potential dovish shift.
Financial Market Reactions
After being initially challenged, stocks steadied, anticipating a 25-basis-point cut at the FOMC policy meeting. With the probability rising from 56% to 87%, the likelihood of a 50bps rate cut seems diminishing.
Euro Risks Under ECB Rate Movements
- The euro is projected to weaken if the ECB enacts further easing.
- Christine Lagarde and the ECB are expected to signal a 25bps reduction this week, which is viewed with strong confidence.
- Market futures suggest additional reductions, with a 32% probability of a third cut.
Ilya Spivak emphasizes that a sharp decline in the euro might occur following the ECB's aggressive stance. As the Fed appears to maintain a gradual pace, this could create significant shifts in the currency markets.
This article was prepared using information from open sources in accordance with the principles of Ethical Policy. The editorial team is not responsible for absolute accuracy, as it relies on data from the sources referenced.