Only The Kiwi Flies
Central banks are being forced to change stance. Following yesterday’s weak PMI data, the European Central Bank is now likely to cut interest rates on May 2. UBS Economics expects a 25bps reduction in the refinance rate to 0.50%. That is likely to push the euro down into a lower 1.28-1.30 range against the dollar. The ECB is unlikely, however, to cut its deposit rate below zero just yet. Such a move would shock investors and push the euro quickly below our year end target of 1.20. Overnight the Bank of Canada also downplayed its tightening bias. Governor Carney said there was still slack in the economy and inflationary pressures were not severe.
Click here to read the full report: UBS
UBS