ECB: Lagarde: In A Good Position To Navigate Outlook; One Dissenter To Rate Cut
The ECB Q&A has started (MNI commentary in italics):
Q: "On rates, has anyone today advocated for pausing or a 50bp cut? After today’s cut to 2%, does a pause in July make sense?"
A: "We cut rates by 25bps and with today’s cut at the current level of interest rates, we believe we are in a good position to navigate the uncertain conditions that will be coming up. It was an almost unanimous decision. There was one GC member who didn’t support the decision".
- Hawkish initial reaction in EUR rates to the ECB being in a "good position" to navigate the outlook. ERZ5 reaches a low of 98.220 before moving back to 98.235 at typing. It's reasonable to assume that the dissenter was arch-hawk Holzmann
A: "Following on from that…. We analyzed the situation in the light of the three criterias that you know well, because they are repeated several times in the monetary policy statement and have not varied for a number of meetings now. But under those three criteria, really, the situation points towards inflation settling at our 2% targets. We can come back to the path, but it's this is what we are seeing, and that is what has predicated the cut that we made today".
- "Now, you asked me about my future, which is far less important than the future of the economy and the future of our monetary policy. Rest assured, but I can very firmly tell you that I have always been, and I'm fully determined to deliver on my mission. And I'm determined to complete my term. So, I regret to tell you that you're not about to see the back of me."
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BUNDS: Little Reaction To News Of Second Merz Vote
German paper is wider vs. Tsys across the curve, despite this morning’s political headlines out of Germany.
- German yields 0.5bp lower to 2.5bp higher, curve twist steepens.
- Bund futures around the middle of their 39-tick session range after respecting yesterday’s low, last 130.90.
- There hasn’t been much reaction to news that there will be a second vote in CDU leader Merz’s bid to become Chancellor later today (15:15 CET/14:15 BST)..
- A reminder that the move away from session lows that came after Merz’s failure to win enough support in the first vote was only shallow, signalling that the market either believed that he would still become Chancellor at some point or that the most viable alternatives wouldn’t have much of a downside impact on German fiscal spending.
- Looking at the voting backdrop, J.P.Morgan note that “one theory is that a few members of the CDU/CSU (and possibly SPD) were disgruntled by either the coalition treaty itself or because they missed out on some government/parliamentary roles. Perhaps such individual decisions by a few members of the parties exceeded the coalition’s majority in an unintentional way. Having sent that signal, they may now support Merz in a second vote. However, this is only speculation making the rounds in the German press”.
- They note that “this matters for the government’s stability in future. If this morning’s opponents are more structural in nature, rather than a protest vote to send a signal, they may also oppose the government in votes on general government policy. That would be a more significant problem”.
MNI: US REDBOOK: APR STORE SALES +6.7% V YR AGO MO
- MNI: US REDBOOK: APR STORE SALES +6.7% V YR AGO MO
- US REDBOOK: STORE SALES +6.9% WK ENDED MAY 03 V YR AGO WK
EQUITIES: Estoxx put spread
SX5E (17th Apr) 3500/3400ps, bought for 5 in 5k.
