What: ECB rate decision
When: Rate decision and press release on 11 April at 12:15 GMT (14:15 CET) and post-meeting press conference at 13:00 GMT (15:00 CET)
Expectation: Interest rate maintained at 4.5%. Laying the ground at the press conference for a potential rate cut in June.
How will the market likely react? The previous ECB rate decision on 7 March delivered the biggest single day rally in European equities since early January as the ECB revised down its inflation forecast for 2024 to 2.3% from 2.7%. It also guided lower economic growth supporting the market’s view that a rate cut could come in June. With yesterday's upside surprise to US March inflation figures showing inflation is entrenched in the US economy, the ECB is put in a difficult position. The market is now pricing the same ECB policy rate by December 2024 as it did in late November 2023. If the ECB leads the Fed in cutting rates, it could weaken the euro and support the export sector of the European economy. The recent ECB Bank Lending Survey showed that loan demand from firms have declined substantially, but the overall message across all credit was still balanced. The market in Europe has set itself up for a June rate cut, so any hawkish lean from the ECB will upset risk sentiment. Read Althea Spinozzi’s, Head of Fixed Income Strategy, ECB preview from this Monday.
The table below shows our views ahead of the April ECB meeting.
Why does it matter? The ECB meeting is crucial for markets as it sets monetary policy, impacting interest rates and investor sentiment. Decisions made at ECB rate meeting shape economic expectations and influencing asset prices in the euro area. As the global economy and central banks have become less synchronized in their dynamics, these decisions are more important than before. For Southern European countries and their equity markets, the ECB decision is even more important as these economies are weaker and less robust against high interest rate levels.
As the chart below shows, the market pricing of ECB policy rate has changed by almost 100 bps expecting a policy rate of almost 3.75% (three rate cuts from current policy rate) from as low as 2.75% in December 2023.
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Head of Fixed Income Strategy
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Head of Commodity Strategy
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Head of Fixed Income Strategy
Quarterly Outlook
Head of Commodity Strategy
Disclaimer
The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.
Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)