Italian ECB Governing Council Member Fabio Panetta urged the central bank to steer its attention toward inflation projections rather than attempting to anchor policy decisions on the elusive concept of the “neutral interest rate” or R-star. In a letter to the Financial Times, Panetta argued that the neutral rate is an invisible target that can…
Markets European markets took a different, more pessimistic view on yesterday’s Fed policy meeting compared to the US. They appear to have more attention to the (stagflationary) risks in the new forecasts instead of Powell’s reassuring message. European stocks dropped more than 1% with Wall Street suffering from spillover effects. But contrasting with the previous…
EUR/USD rises to near 1.0850 as the US Dollar weakens amid accelerating concerns over the US economic outlook. US President Trump’s policies are expected to slow down the US economic growth. ECB’s Centeno expects that Eurozone inflation is almost out of the woods. EUR/USD trades firmly around 1.0850 after recovering early losses in Monday’s European…
A 25 basis point cut to the ECB deposit facility rate is widely anticipated, marking the seventh cut in the current cycle. The ECB continues to cut rates amid slow Eurozone growth, while the Federal Reserve pauses, creating a notable divergence in monetary policy. What next for EUR/USD? A 25 basis point cut to the…
Markets Higher-than-expected European inflation numbers and more rumours on fast and huge fiscal spending in Europe weighed on European bonds with curves bear steepening. February inflation rose by 0.5% M/M (vs 0.4% consensus) with the annual number moderating from 2.5% to 2.4% instead of the hoped-for 2.3%. Core CPI picked up to 0.6% M/M and…
Markets Event risk looms large this week as narratives unfold at similar levels. We therefore continue to err on the side of caution, favoring traditional haven assets. First, there’s the US growth story. Markets turned more sensitive to risks of a US growth slowdown or even recession as US President Trump’s policy mix (going from…
Markets US Treasury Secretary Bessent said in an interview with Bloomberg Television that the Treasury team under the previous president had shortened the duration in Treasury sales. While he’s not shortening any further, the US Treasury is also a long way off in terming out the debt. He noted that elevated inflation and competition by…
Markets Weaker-than-expected US retail sales triggered a rally in Treasuries. Yields declined between 4.1 and 6.2 bps in what was otherwise a dull trading session. German rates still finished marginally in the green, adding up to 2.5 bps at the front. UST outperformance dragged the dollar lower against all major peers. The trade-weighted USD index…
Dollar faced significant volatility last week as shifting trade policy signals from the White House left investors scrambling for clarity. Initially, tariffs on Canadian and Mexican imports were imposed, only to be quickly suspended for 30 days following new agreements on border security and fentanyl control. Now, the focus turns to “reciprocal tariffs,” a move…
European Central Bank (ECB) Governing Board Member Mario Centeno noted that deflationary pressures within the European economy are becoming a concern for policymakers. Dropping interest rates below neutral in order to stimulate the economy may be necessary, according to Centeno. Key highlights Undershooting 2% inflation is a risk if investment doesn’t pick up. We may…