Collinson FX: June 7: ECB (European Central Bank) cuts rates for the first time in five years

by Collinson FX 10 Jun 2024 21:00 NZST 10 June 2024

Young sailors in the SailGP Inspire program try out the Armstrong Wing Foil board on Race Day 1 of the ITM New Zealand Sail Grand Prix in Christchurch, New Zealand. March 2024 © Armstrong Foils

June 7: ECB cuts rates

The ECB (European Central Bank) cuts rates for the first time in five years, as expected, offering relief to borrowers. This has been an exercise in economics, that the best cure for inflation, is recession. The US, Canada and Australia/NZ are also employing this ‘tried, tested and proven’ economic strategy. The pain for borrowers is set to continue in the US, Australia and New Zealand.

Markets anticipate that the ECB will cut again, at least once, this year. The Fed is not expected to consider cuts until later in the year and the RBA and RBNZ are projecting no relief until 2025. This was an entirely expected move from the ECB and markets hardly moved. Bond yields drifted lower and currencies tread water. The EUR traded 1.0870, while the GBP still looks to hit 1.2800, once again.

The ECB actions had little impact on commodity currencies, with the NZD trading just below 0.6200, while the AUD regained 0.6650. The Australian trade surplus continued, but with falls in both exports and imports, while markets await today’s key trade data from China. The important Non-Farm Payroll number, set to be released in the US tonight, is expected to show a weaker labour market.

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