Gleanings from the ECB

Written on 07/31/2023
Team UCapital 24

In the days following the ECB meeting, ECB officials always provide explanations and support in interpreting the decision. I find this game a little silly. But never mind. This morning the press seems to be particularly interested in an interview with ECB President Christine Lagarde.

"I am not sure whether the President is the one we should be paying closest attention to in this phase. However, I am discussing the ECB projections here. I leave that to our ECB watchers. I am interested in the perception on the market. And any comments from the President are always of particular interest in that context," Ulrich Leuchtmann, head of FX and Commodity research at Commerzbank, said.

Lagarde suggested that there might be a pause in the rate hike cycle in September, but that such a pause did not have to be seen as the end of the cycle.

"It seems to me that once again the European central bankers are copying the behavior of their colleagues in the US. The Fed has also reached a mode where it is taking breaks rather than continuously hiking rates. It is unclear why the many employees of the ECB and the national central banks are never coming up with their own ideas for monetary policy but always simply copy their colleagues in the US."

"If the ECB more or less follows the Fed in its monetary policy, that does not mean that EUR/USD will not receive any momentum any longer. Just from a different angle. Because equal monetary policies under different circumstances (inflation, growth etc.) have different effects."

"However, medium-term our EUR/USD projections are nonetheless based on the difference between Fed and ECB: our central bank watchers project that the Fed will soon cut its interest rates again, whereas the ECB will keep rates at the terminal levels for the foreseeable future. That would clearly be EUR positive."