It’s a bit of a mixed start to trading as attention shifts to Brussels where the ECB will deliver its latest policy decision.
In the lead up to the meeting, the focus has generally been on how strong a signal it will send on cutting interest rates in September and possibly what other tools it has at its disposal to unleash in the months after. But that has changed in recent days as traders have increasingly priced in a 10 basis point cut today, with the market now pricing it at around 50%.
I still think the ECB will hold off for now but in order to avoid too much disappointment, there will need to be a clear nod to the meeting in September. The PMIs on Wednesday were a stark reminder of the weakness across the region, particularly in the manufacturing sector which saw its largest contraction in more than six years, worse in Germany.
With markets so reliant on central bank stimulus at the moment, perhaps investors are just waiting patiently for Draghi and his colleagues to give them what they want. The ECB President has a tendency to be rather dovish so while they may disappoint on the rate cut, I’m sure he’ll deliver in the press conference.
