Cautious optimism as ECB bankers discuss potential next rate cut 🧭

ECB policymakers Mario Centeno, Mārtiņš Kazāks, and Bostjan Vasle collectively highlight a cautious and data-dependent approach to monetary policy. They recognize the trend towards lower inflation but emphasize the need to balance easing restrictions with maintaining some degree of restrictiveness. 

• ECB policymaker, Mario Centeno anticipates the disinflation process to resume after August. He notes that a recovery in real wages is inevitable and emphasizes a data-dependent approach to monetary policy. However, despite his observations, Centeno refrains from providing a specific timeline for when the ECB might resume cutting rates. He makes it clear that a rate cut in July is off the table and that there is no pre-commitment to a potential rate cut in September, indicating a cautious and wait-and-see stance.

• Mārtiņš Kazāks considers market expectations on ECB rates to be reasonable and acknowledges the high uncertainty in the economic outlook. He suggests that while some restrictions can be eased, a degree of restrictiveness should still be maintained to ensure stability. Kazāks supports the idea of further rate cuts if the data trajectory remains favorable.

• Slovenian central bank chief, Bostjan Vasle expects that rate cutting will proceed at a slower pace compared to the previous rate hikes. He highlights that inflation has markedly slowed in recent months but warns of several risks to the disinflation process, including persistent wage gains, services costs, and political tensions. Vasle, known for his hawkish stance, emphasizes the importance of making decisions on a meeting-by-meeting basis, aligning with the broader governing council's approach to wait for comprehensive data before making any rate cut decisions, potentially in September.

EURUSD (H4 interval)

The EURUSD pair experienced a notable bearish momentum as it broke through a critical support zone at 1.070. This decline was influenced by more hawkish FOMC and political uncertainty in Europe, which also triggered a selloff in European stocks. The next target is around the 1.0600–1.0670 support zone, which coincide with the last local bottom in early April this year. 

Source: xStation 5