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September’s ECB Cheat Sheet: Buy the data, sell the cut
Markets are fully pricing in a 25bp rate cut from the ECB this week. The question markets seek an answer to is what follows next. For October, the market forward rates imply a 40% chance of a further 25bp cut, and it is more than fully priced for December when the ECB will have its next forecast update. We think there is some upside risk to front end rates if the ECB reiterates the importance of forecasts for its decision making. Downplaying the chance of an October cut and confining itself to quarterly steps on rates – at least for now – should act as a brake on the potential pace of easing, less on the end ... (full story)