Probability grows of an ECB October cut, odds at 65%
Sept 20 (Reuters) -Pricing for the ECB's October policy decision implies that an additional rate cut is more likely than not. Currently, the probability of such action stands at 65%, up from 33% on Thursday.
As noted previously, the fact that the Fed kickstarted its easing cycle with an outsized 50 bp cut does raise the risk that the ECB may well go ahead and lower rates at its next meeting on Oct. 17.
This depends, however, on a notable deterioration in the growth outlook between now and then - which will likely increase the markets' sensitivity to Monday's flash PMI data. In any case, the growing probability of a cut next month is a concern for euro bulls.
Rhetoric from ECB officials shows a clear divide between doves and hawks, with doves entertaining the idea of a cut as soon as next month while hawks remain steadfast in their view that quarterly steps are the preferred and appropriate path.
For more click on FXBUZ
ECB pricing Oct https://tmsnrt.rs/4es2XD6
ecb speak https://tmsnrt.rs/3XNu5XN
(Justin McQueen is a Reuters market analyst. The views expressed are his own.)
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