Traders increasingly confident of September ECB pause, bond yields rise
Money markets now price in less than a 30% chance of a 25 basis-point rate cut when the ECB meets next on September 11.
That was closer to 50% on Wednesday, before news broke that the European Union and the United States were heading towards a deal that would result in a broad tariff of 15% applying to EU goods.
The ECB, which kept rates on hold after eight cuts over the last year that halved its policy rate to 2%, fuelled the move further.
With the ECB expected to pause on Thursday, analysts said it was President Christine Lagarde's focus on holding rates that boosted confidence in a September pause.
At the ECB's post-meeting news conference, Lagarde stressed the ECB was in a "good place" in terms of policy, while downplaying the risk of an inflation undershoot next year and noting that supply bottlenecks and trade disruption caused by tariffs could also emerge as inflationary.
"Perhaps it was the lack of the use of the word pause and she described rates as on hold and decision by decision," said Dean Turner, an economist at UBS Wealth Management.
Two-year German bond yields , sensitive to interest rate expectations, rose by more than 10 basis points to 1.90%, heading for their largest one-day rise since mid-May.
Its 10-year yield , the benchmark for the euro area, was up similarly.
The euro reversed an earlier fall against the dollar and was last up 0.1% at around $1.179
European shares slightly pared gains following Lagarde's remarks. The region-wide STOXX 600 was last up around 0.2% versus around 0.4% before the ECB announced its policy decision (.STOXX), opens new tab.
A 15% tariff would be only half the 30% rate U.S. President Donald Trump had threatened to impose on the EU earlier in July. If it materialises it also takes out the ECB's worst case scenario, which had pencilled in a 20% tariff.
"She's a bit hawkish," said Arne Petimezas, director of research at AFS Group, said of Lagarde. "She downplayed the undershooting of inflation in 2026 and she said growth is a bit better than expected."
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Daily Mail
6 minutes ago
- Daily Mail
Donald Trump hits out at Federal Reserve as US jobs fall
Donald Trump launched a fresh attack on the chair of the Federal Reserve after the US jobs market suffered a sharp slowdown over the summer. The world's largest economy added just 73,000 jobs in July – fewer than the 110,000 expected – reviving hopes of a September interest rate cut. And figures for May and June were lowered by 258,000 in an unusually large revision by the US Bureau of Labor Statistics (BLS). In retaliation, Trump last night said he would sack BLS head Erika McEntarfer. It came as US stocks tumbled after Trump slapped tariffs on trading partners. The Dow Jones Industrial Average fell 1 per cent yesterday afternoon, while the S&P 500 dropped 1.2 per cent. The tech-focused Nasdaq was down 1.7 per cent. European stocks were also rocked by Trump's trade war, with Germany's Dax losing 2.7 per cent and Paris's Cac index dropping 2.9 per cent. The UK got off lightly as the FTSE 100 fell 0.7 per cent, or 64.23 points, to 9068.58. Pharmaceutical firms were among the biggest fallers in London after Trump demanded lower prices. AstraZeneca fell 1.9 per cent and GSK dropped 1.5 per cent. The retreat came as revised figures showed the US economy added just 14,000 jobs in June, a figure revised from a previously reported 147,000. Payrolls for May were slashed by 125,000 to a gain of 19,000 jobs. The BLS described revisions as 'larger than normal'. Atakan Bakiskan, US economist at Berenberg, said: 'The July report provided ammunition for those expecting a Fed rate cut in September.' 'This data has led to a rapid recalibration of US interest rate expectations,' Kathleen Brooks, research director at XTB, said. On his social media platform Truth Social, Trump wrote: 'Too little, too late. Jerome 'Too Late' Powell is a disaster. DROP THE RATE! .. Tariffs are bringing billions of dollars into the USA!' The President has branded the central bank chair a 'stubborn moron', saying he 'must lower interest rates now'. 'If he continues to refuse, the board should assume control and do what everyone knows has to be done,' he added. Reports last month suggested Powell's future could be in doubt after Trump met congressional Republicans to discuss sacking him. But the President later insisted he would only fire the central bank boss if he were guilty of fraud.
Reuters
6 minutes ago
- Reuters
Bessent says US has 'makings of a deal' with China
WASHINGTON, Aug 1 (Reuters) - U.S. Treasury Secretary Scott Bessent said on Friday that he believed that Washington has the makings of a deal with China and that he was "optimistic" about the path forward. "This week's negotiations in Stockholm have advanced our talks with China, and I believe that we have the makings of a deal that will benefit both of our great nations," Bessent said in a post on X that was subsequently deleted. "I am optimistic about the path forward," he added. A Treasury Department spokesperson said the post was being reposted because the images attached to it had not uploaded correctly. The spokesperson also noted that the language in the post was in line with what Bessent had said in various media interviews this week. In an interview with CNBC on Thursday, Bessent said the United States believes it has the makings of a trade deal with China, but it is "not 100% done." U.S. negotiators "pushed back quite a bit" over two days of trade talks with the Chinese in Stockholm this week, Bessent told CNBC. China is facing an August 12 deadline to reach a durable tariff agreement with President Donald Trump's administration, after Beijing and Washington reached preliminary deals in May and June to end escalating tit-for-tat tariffs and a cut-off of rare earth minerals.
Daily Mail
6 minutes ago
- Daily Mail
Watch shares plummet as tariffs hurt Switzerland
Shares in Watches of Switzerland plunged after Donald Trump whacked a 39 per cent tariff on Swiss imports – hitting it with the toughest tariffs in Europe from August 7. The stock fell 6.8 per cent, or 23.8p, to 326.8p, deepening the gloom around the luxury industry. Shares in the group, which sells brands Rolex, Cartier and Audemars Piguet, and is advertised by actress Dakota Johnson (pictured), have plunged 23 per cent since Trump first announced tariffs on April 2. Analysts at Barclays said this could be a 'significant headwind' for the London-listed company as brands will be likely to raise prices. It had been opening US showrooms after being bitten by waning demand for watches and jewels, especially in the UK and Europe. Swiss luxury group Richemont also fell by 2.6 per cent.
