Last week’s ECB meeting was more dovish than expected. While the ECB kept its deposit rate on hold at 4% and reiterated that it was premature to talk about rate cuts, president Lagarde’s comments were dovish relative to the December meeting and her recent comments in Davos.
Spurred by gains on Wall Street and the European rates market pulling forward the pricing of a first ECB 25bp rate cut to April, and a chunky total of 140bp of rate cuts in 2024, the German stock market, the DAX, has since launched an assault on its January high.
This week, the Bank of England (BoE) takes its turn to step up to the plate. The BoE will likely keep rates on hold at 5.25% and deliver a dovish pivot by removing its tightening bias and downgrading inflation expectations.
The UK rates market has a first BoE 25bp rate cut priced for June and a total of 100bp of rate cuts priced for 2024. Confirmation of a dovish BoE pivot could be the catalyst that…
