Rates Spark: ECB Unlikely To Trigger Any Directionality In Rates

2025-06-05 05:05:00 ET

Summary

• The ECB will most likely cut 25bp, which is almost fully priced in by markets.
• With plenty of uncertainty ahead from the US-EU trade tensions, we doubt the ECB will steer markets out of the current range-bound trading.
• A sharp move lower of UST yields on Wednesday did little to move euro rates, further highlighting the disentanglement between the two markets.

By Michiel Tukker , Benjamin Schroeder

Both markets and the ECB need more data to decide on direction

Heading into Thursday’s European Central Bank meeting , the market is almost fully priced for a 25bp cut. This means the market will be mainly looking for hints about future rate trajectories during the press conference. A downwardly revised inflation projection and a balance of risks around the growth outlook, perhaps more clearly pointing to the downside, would generally paint a dovish backdrop, but given the uncertain environment around trade specifically, one should not expect any concrete hints from President Lagarde....

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