2024-07-17 05:52:00 ET
Summary
- Markets are now pricing in 48bp of ECB cuts in 2024, just shy of two full 25bp cuts.
- The rate-cutting narrative building in the US was the main driver of the increase, but in our view, the spillovers will be more limited.
- The Fed’s Beige Book is scheduled for later today.
By Benjamin Schroeder | Padhraic Garvey, CFA | Michiel Tukker
Market pricing for 2024 ECB cuts looks stretched
Euro rates are now pricing in 48bp of cuts for 2024, which is just 2bp shy of two full 25bp cuts. In our baseline case, we also see scope for two more cuts this year, but the pricing seems stretched. To justify such pricing, a non-negligible probability should be assigned to three more cuts because only one cut is also still on the table....
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Rates Spark: Pricing Of ECB Cuts Facing Limits