ECB: Lagarde: "Meaningfully less restrictive" is not "innocuous little change"
Mar-06 14:13
- Q: You say that your monetary policy is becoming meaningfully less restrictive, does this mean you could slow the pace of rate cuts now and perhaps pause in April? Did you discuss such a scenario at your meeting today?
- A: "You very well noted that we have changed the wording of the fourth paragraph of our monetary policy statement... it's not just, you know, an innocuous little change, it's a change that has a certain meaning. What we had previously was that we would keep our restrictive monetary policy as long as was necessary etc. and that was very much a static assessment of what was needed. We are now moving by having our monetary policy is becoming meaningfully less restrictive to a more evolutionary approach. So in other words, we take account of the journey that we have travelled 150 basis points since we started cutting and we acknowledge the fact that, as a result, it is becoming meaningfully less restrictive. We add to that in the same paragraph the two forces that we are seeing operating. One, on our financing conditions.. I used a comparison a few weeks ago when we were at the G20... I used the comparison of the Cape of Good Hope, where you have warm water from the Indian Ocean and the cold water from the Atlantic. And this is really where the position is at the moment, where we have the impact of the current monetary policy decisions that we take, and have been taking, which is to cut rates, but at the same time, we still have the cold water of the Atlantic, meaning the remaining effects of decisions that we have taken over the course of time, and that's really where we are at the moment. And that has led us to acknowledge the fact that our measures, that our monetary policy, is becoming meaningfully less restrictive."
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Historical bullets
STIR: Effective Fed Funds Rate
Feb-04 14:05
- FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $94B
- Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $264B
- Earlier Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.35% (-0.03), volume: $2.413T
- Broad General Collateral Rate (BGCR): 4.33% (-0.01), volume: $913B
- Tri-Party General Collateral Rate (TCR): 4.33% (-0.01), volume: $890B
- (rate, volume levels reflect prior session)
FOREX: CADJPY Recovery Bolstered by Hold of Trendline Support
Feb-04 14:01
- Following in the footsteps of Mexico’s administration, Canadian PM Justin Trudeau announced an agreement with the US, circumventing the immediate implementation of 25% tariffs.
- CADJPY has moderately outperformed following the sharp CAD recovery from Monday’s lows, extending the bounce to 2.93% in recent trade, and up 0.68% during today’s session.
- The recovery has been bolstered by the cross holding trendline support on Monday, drawn from the 2020 lows. The trendline intersects close to the psychological 105.00 handle, which has proved pivotal on a closing basis over the last 18 months.
- An extension of strength today has narrowed the gap to both 20- and 50-day EMAs, currently intersecting at 108.13 and 108.52 respectively.
- ING believe markets are not fully pricing out the tariff threat just yet. Primarily because of the short delay, but also because headlines have provided a higher degree of uncertainty and unpredictability that harms high-beta currencies. This is due to direct protectionism exposures and due to risk sentiment implications.
- However, they highlight a cross like AUD/CAD should trade sharply lower given Canada has dodged tariffs and China has not, but it is only 0.5% lower on the day. That signals markets are pricing in a good chance that the US and China will also strike a deal and delay tariffs.
BONDS: Core Bonds are seeing broader selling
Feb-04 13:55
- Some selling in Govies across both sides of the Pond, and while the Volume in Tnotes is fairly subdued, the German Bund sees a notable session in terms of Volumes.
- Initial support in Bund is seen at 132.34, Monday's opening gap.
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