ECB: Ahead of September: ECB Communication - The Detail
Click here for a full summary of ECBspeak since the July decision
September meeting and rate outlook: There appears to be little to no appetite for a September rate cut. While some Governing Council members are still keeping the door open to one more cut this cycle, further easing will need to be motivated by dovish data developments.
EU-US Trade Agreement: The EU-US trade agreement includes a baseline reciprocal tariff rate of 15%, essentially the mid-point of the ECB’s baseline (10% tariff rate) and severe (20% tariff rate) scenarios from the June projection round. Despite this, both Lagarde (Aug 20) and Schnabel (Sep 2) have emphasised that the agreement is “well below” the severe scenario assumptions and “somewhat higher – but still close to” the baseline assumptions. As such, Executive Board members appear to be viewing the deal in an optimistic light.
September Projections, Growth and Inflation Outlook: Lagarde (Sep 1, Aug 25) has expressed confidence in the outlook, noting that inflation is at target and that “growth is relatively modest, but resilient and on its way up”.
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EUR: FX Exchange Traded Option
FX Exchange trade Option, looking for EUR upside, doesn't cover the next Sep ECB meeting (11th Sep):
- EURUSD (5th Sep) 1.1600c, bought for 0.0096 in 1.4k.
BUNDS: A few ticks gained post US ISM
- Bund sees a small jump higher after the ISM and some of its components come below expectations, Price paid was decent beat, but MNI noted some upside risk to price on our preview.
- Moves and ranges are still fairly limited although the US Emini has pushed through the session low.
US TSYS: Post-ISM Services React
- Fast two-way post-data trade, Treasury futures still weaker but off lows after mostly lower ISM Services data, prices paid higher than expected.
- Tsy Sep'25 10Y futures currently trades -4.5 at 112-07.5 vs. 112-05 low. Initial technical support well below at 110-19+, the Jul 24 low. Key support is 110-08+, the Jul 14 and 16 low.
- Initial resistance above at 112-15.5 (Aug 5 high) followed by 112-23 (May 1 high).
- Curves remain flatter: 2s10s -1.504 at 50.004, 5s30s -2.032 at 103.203.
