EUR: The Euro is rallying this morning following ECB sources that policymakers will discuss whether to raise interest rates by 25 or 50bps at this week’s meeting. Get your market update from JMcQueenFX here:
The Euro is rallying this morning following ECB sources that policymakers will discuss whether to raise interest rates by 25 or 50bps at this week’s meeting. Alongside this, the ECB is reportedly homing in on a deal to make new bond purchases conditional on Next Generation EU targets and EU fiscal rules.Consequently, money markets are now pricing 40bps worth of tightening at this week’s meeting and circa 100bps of hikes by the September meeting.
This view had been echoed by ECB’s Holzmann, Simkus and Kazaks. Therefore, this would suggest that a discussion of a larger hike was already within the plans for this week. However, despite the extremely uncertain macroeconomic environment, the ECB has felt the need to restrict themselves to their sequencing by not raising rates at last month’s meeting and also pre-committing to a 25bps at this week’s meeting.
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