ECB Up Next
Despite traders continuing to keep a keen eye on the actions of President Trump, the European economy will begin to command attention for the remainder of this week. Having taken a breather on his squabble with Columbia over the weekend, the newly inaugurated President’s attention will turn to Congress. Less signing, more schmoozing will be in order to convince his majority of Republicans to enact his agenda. The main focus for European markets this week will be the ECB decision due later on today.
The risk most present to the European economy is no longer inflation. It’s one of growth and 3% benchmark rates remain an inhibition to the economy. Whilst not falling into the scope of the ECB’s decision, economic growth statistics concerning European Union member states as well as the group as a whole has been trickling in this morning. Euro area growth is expected to weigh in at just 0.1% for the fourth quarter of 2024. Germany continues to be the laggard with preliminary figures published earlier this month showing a contraction of 0.1%.
The forecast for the ECB meeting is for a 25-basis point cut. This will bring the deposit rate in Europe to 2.75%. This contrasts with a 4.25-4.5% range in the US following their decision to hold rates overnight and a UK bank rate of 4.75%. The Dollar is largely unchanged following the Fed’s decision and the market still sees the first rate cut of 2025 not expected to happen until March at the earliest and perhaps more likely May/June.
Discussion and Analysis by Charles Porter
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