The EURO
The European Central Bank (ECB) has chosen to maintain its current interest rates, signalling a "pause" in its rate hike strategy.
The Governing Council deems existing rates as sufficiently restrictive to drive inflation back to the target, emphasizing the continued impact of past rate increases on financing conditions. Reinforcing their commitment, the ECB stated that reinvestments under PEPP will continue until "at least the end of 2024."
In the subsequent press conference, Lagarde expressed a pessimistic outlook, foreseeing a weak economy in the coming months with tightened financial conditions exerting pressure on the Eurozone.
Goldman Sachs has released its view of ECB policy outlook, timelines for rate cuts as below;
European Central Bank - Policy Outlook:
End of Hiking Cycle: The ECB's rate hiking cycle is believed to have concluded, with rates expected to remain on hold at 4.00%.
First Rate Cut in 3Q24: The initial reduction in rates is forecasted for the third quarter of 2024, followed by a consistent cut pace of 25 basis points per quarter until the end of 2025.
Policy Rate Projection: The ECB's policy rate is anticipated to reach 2.5% by the fourth quarter of 2025.
On this basis the Euro has not been as strong as the USD and the ECB is predicted to move before its US Fed counterparts in reducing the rate.
Wednesday sees political elections in Holland and Friday German GDP figures for Q3.
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