EUR: Dissent emerges over rate cut – ING

Minutes from the European Central Bank’s (ECB) June meeting, released yesterday, showed that some members disagreed with cutting rates, notes Francesco Pesole, FX analyst at ING.

The Euro will move within the 1.08/1.09 range

“It is increasingly clear that the June move was a consequence of a series of pre-commitments, rather than a strong intention to initiate an easing cycle. Indeed, the minutes confirm the centrality of data dependence at this stage, with a particular focus on wages, whose rigidity is keeping many ECB members on the cautious side when discussing further easing.”

“At the same time, there appears to be growing confidence in the ECB staff’s economic projections by the Governing Council. These projections remain broadly optimistic about disinflation by the end of 2025, and will justify two more rate cuts by the ECB this year in our view. The market’s assessment is less dovish, at 38 bps.”

“EUR/USD may move within the 1.08/1.09 range today, and we believe the lingering risk of a further widening of French bond spreads after Sunday’s runoff election means upside remains limited.”