The euro suffered further broad losses during yesterday's trading session, after the ECB once again lowered interest rates by 0.25%. This marks the 3rd rate cut this year, and the first back-to-back cut in 13 years, prompted by falling inflation and weak economic growth.
President Lagarde stated “We believe the disinflationary process is well on track and all the information we received in the last five weeks were heading in the same direction – lower.” Notably, she also went on to say “The inflation outlook is also affected by recent downside surprises in indicators of economic activity.”
Despite the interest rate cut, there is a growing feeling amongst many market participants that the central bank is "falling behind the curve" and may well need to cut rates further and deeper to stave off a recession.
Elsewhere, once again the strength of the consumer continues to defy forecasters after the latest US and UK retail sales data came in much stronger than expected.
Data released this morning showed UK consumption activity rose by 0.3% in September versus market expectations of a 0.3% decline.
*Daily move - against G10 rates at 7:30am, 18.10.24
** Indicative rates - interbank rates at 7:30am, 18.10.24
The broad USD rally continues, supported by a recent slew of better-than-expected economic data, which has led to higher bond yields and a reduction in market pricing for interest rate cuts next year. This is in stark contrast to the EU and China where struggling economies are prompting markets to price in more aggressive monetary policy easing as central banks struggle to support their ailing economies.
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