Following the ECB’s quasi-commitment to ease policy next month, the market was pricing in around 13bp of rate cuts in coming months, close to our own forecast of a 10bp cut in the Refi rate at least in June. Term money market rates such as the 1Y1Y Eonia have fallen back to year lows, although overnight rates have remained sticky amid lower excess liquidity. Importantly, the EUR has failed to rebound from Thursday’s drop, perhaps reflecting growing expectations of a negative deposit rate. We believe that the prospects for such a move will indeed hinge upon developments in the FX market in the next few weeks. Next ... (full story)