Daily Alert – Friday 12th April 2024: Dovish ECB sets up clear divergence

Mark NugentApril 2024, Daily Alert

Daily Alert – Friday 12th April 2024: Dovish ECB sets up clear divergence

Good afternoon.

We got a pretty dovish European Central Bank (ECB) yesterday. The deposit rate was held at 4.0%, as expected. However, the narrative indicated a likely cut in June and it was clearly stated that the ECB is not necessarily on the same path as the Fed. This is central bank-speak for REALLY NOT ON THE SAME PATH.

This sets up a clear divergence in interest rates between the ECB and the Fed. With the Fed rate at 5.25 to 5.50% and higher-for-longer, and the ECB at 4.0% and looking likely to cut, the divergence will get wider. The EUR fell yesterday and is dropping significantly today. The EURUSD is at 1.063 as I write (1630, UK-time). The markets are already talking about further euro weakness, with some muck rakers mentioning the dreaded “parity” word (EURUSD = 1.000).

We will see.

Have a great weekend. I’ll be back Monday.

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