The ECB opted to cut interest rates by 25 bps in the context of its policy committee

The ECB caught many off guard by slashing interest rates by 25 bps to 3.5% at its monetary policy meeting yesterday. At the press conference, ECB Chief Lagarde said that this decision was an unanimous one and data-dependent. She commented that recent Eurozone inflation data are encouraging and pointing towards the 2% benchmark. She added that the impact of higher wages on inflation is easing as labour cost pressures are themselves moderating. Lagarde indicated more rate cuts for this year but refrained from giving more information on the timing. Growth in 2024 is projected at 0.8% down from the previous estimates of 0.9%. The common currency picked up from a low of 1.1005 following the policy decision and is now trading at 1.1064 against the USD. Ecofin meetings will be taking place during the day and French monthly CPI is also due.

Annual Producer Price Index and core PPI slipped to 1.7% while core PPI remained stable with a 2.4% expansion, below projections. These producer prices showing a similar contraction trend like Consumer Price Index numbers are yet another indication that the time is ripe for cutting interest rates. Also, employment market figures revealed that first-time jobless claims totalled 230K for the past week. The US Department of Agriculture WASDE report and the monthly budget statement are due today. Supported by geopolitics on the one hand and weighed down by FOMC rate cut expectations on the other hand, the greenback was trading at 101.14 against similar majors at the time of writing.