ECB: Revival of rate cut speculation – Danske Bank

Analysts at Danske Bank explain that the ECB rate cut talks are back on the table after the latest Bloomberg reports and Dutch Governor Klaas Knot’s dovish remarks.

Key quotes

“ECB rate cut speculation got revived on Tuesday on Bloomberg's sources story on ECB examining the FX drivers, which got further ignited by Dutch Governor Knot's saying ECB could cut the deposit rate and sources stories saying that ECB officials believe that markets underestimate the probability of a rate cut.”

“Bunds yields went relatively quickly back to levels prior to the news, however, front-end pricing point added almost 1.5bp for a rate cut by year-end (60% chance).”