Why has the ECB’s 25bp hike triggered a euro selloff?! | MarketTalk: What’s up today? | Swissquote

Show notes

The European Central Bank (ECB) raised interest rates by 25bp yet the euro sold off. In fact, many euro bears also jumped on a trade yesterday as Lagarde announced that the ECB significantly pulled its economic projections to the downside. BUT, in the meantime, the ECB revised its inflation expectations higher as well. Therefore, it’s naïve to think that the ECB can’t continue hiking rates with such a sour economic outlook, especially when the barrel of US crude trades past $91pb, and Brent is getting ready to test $95pb.
Rising oil prices are not benign, but the hawkish ECB is not necessarily positive for the euro, and here is why: the data released in the US yesterday showed that both retail sales and PPI got a decent boost because of higher gasoline prices in August. There is no chance that Jerome Powell will announce the end of the rate hikes next week.
PS: US government drama and shutdown risk could eventually soften US outlook and temporarily prevent the Fed hawks from forcefully coming back.
In equities, ARM rose 25% yesterday and gained another 7% in the afterhours trading!
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