ECB VIEW: Barclays See Less Aggressive Cuts Following US-China De-Escalation
Barclays has revised forecasts for the ECB rate path: they now expect a 25bp rate cut at the next meeting in June, a pause in July, with cuts resuming in September and October for a final depo rate of 1.50%.
- This is a less aggressive path than prior: Heading into the April ECB meeting Barclays expected rates cut by 25bp at every meeting until October to a deposit rate of 1.25%.
- This comes on the back of this week's US-China trade war detente, which spurred them to change their Fed view (now expect the FOMC to cut just 25bp this year, in December, vs their prior call of two 25bp cuts this year in Jul and Sept.)
- Barclays: "The US - China trade war de - escalation has a small positive effect on EA growth, weakening the case for a rapid shift to an accommodative policy stance... On the back of this reduced uncertainty and improved economic backdrop, the easing in global financial conditions, and a slightly weaker euro generated by the US - China trade deal, we revise up our euro area growth outlook forecasts: we now expect EA GDP growth to be flat in 2025, up from -0.2% previously, and rise to 1.6% in 2026, unchanged from previously, on a % Q4 / Q4 basis."
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
EURGBP TECHS: Unwinding An Overbought Trend Condition
- RES 4: 0.8800 Round number resistance
- RES 3: 0.8781 2.236 proj of the Mar 3 - 11 - 28 price swing
- RES 2: 0.8768 High Nov 20 ‘23
- RES 1: 0.8738 High Apr 11
- PRICE: 0.8553 @ 16:04 BST Apr 15
- SUP 1: 0.8520/0.8482 Low Apr 10 / 20-day EMA
- SUP 2: 0.8413 50-day EMA
- SUP 3: 0.8316 Low Mar 28 and a key near-term support
- SUP 4: 0.8299 Low Mar 5
Despite the fade off highs, a bull trend in EURGBP remains intact. Note that a deeper retracement would allow a recent overbought trend condition to unwind. Support to watch lies at 0.8482, the 20-day EMA. Support at the 50-day EMA is at 0.8413. The area between these two averages represents a key support zone. For bulls, a resumption of gains would open 0.8781, a Fibonacci projection point.
US: Voters Give Trump Poor Assessment On The Economy And Tariffs
US President Donald Trump continues to receive poor polling numbers in surveys taken after his April 2 'Liberation Day' tariff announcement. Morning Consult reports: “Trump’s approval rating has slumped to 45%, the lowest point of his second term so far as Americans react to his trade policies, while 52% disapprove, tying last week’s record-high rating since he took office in January. For the first time since May 2021, more voters trust Democrats in Congress than their Republican counterparts to handle the economy (46% to 43%).”
- The Washington Post reports: “Even before the shock of price increases have hit shelves, Trump’s poll numbers have taken a hit. After entering March with narrowly positive ratings overall, the president now faces a disapproving citizenry, with worse ratings on the economy and even worse ratings on his tariffs.”
Figure 1: Expectations for the Economy Over the Next Year
Source: Washington Post
BONDS: EGBs-GILTS CASH CLOSE: Gilts Strengthen Pre-UK CPI
Gilts handily outperformed Bunds Tuesday.
- Softer-than-expected elements of the UK labour market report saw Gilts get off on the front foot across the curve.
- Gilts rallied into the close, potentially in anticipation of tomorrow's CPI data, unlike Bunds which were unmoved.
- On the day, the UK curve twist steepened with a notable rally at the short end, with Germany's bear steepening.
- Italy and Greece underperformed on the EGB periphery.
- Wednesday's data includes UK CPI - MNI's preview is here. And Thursday brings the ECB decision - preview here.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is up 0.7bps at 1.766%, 5-Yr is up 1.6bps at 2.09%, 10-Yr is up 2.2bps at 2.534%, and 30-Yr is up 3.8bps at 2.915%.
- UK: The 2-Yr yield is down 5.6bps at 3.962%, 5-Yr is down 4.3bps at 4.11%, 10-Yr is down 1.2bps at 4.648%, and 30-Yr is up 4.3bps at 5.427%.
- Italian BTP spread up 1.7bps at 118.2bps / Greek up 2.9bps at 92.4bps
