The latest interest rate decision of the European Central Bank was announced: adjusting market expectations and temporarily ensuring the stability of the euro.
The European Central Bank announced the latest interest rate, cutting interest rates by 25 basis points. The three major interest rates will be 4.25%, 3.75% and 4.5% respectively. The European Central Bank's interest rate cut is the second central bank in the G7 member countries to cut interest rates. The previous one was Canada's interest rate cut last week.
And the European Central Bank said that as long as there is a need, it will continue to maintain restrictive interest rates, and at the same time dispelled rumors that it has not pre-committed to any interest rate path.
In other words, if the economy allows, interest rate cuts will not be too frequent in the short term, and interest rate cuts will be limited. At the same time, the previous rumors that the European Central Bank's interest rate cut will start seasonal interest rate cuts have been overturned, and the rhythmic interest rate cuts will not be maintained.
Market traders believe that there will be another 40 basis points of interest rate cuts this year.
The European Central Bank expressed this not because it really decided not to adopt the rhythm of seasonal interest rate cuts, but because it did not want to give the market too many expectations of interest rate cuts too early, which would buffer the decline of the euro.
At the same time, the ECB has reduced its inflation forecast by 2.5 percentage points, and raised its expected inflation by 20 basis points this year, lowered it by 20 basis points in 2025, and kept it unchanged in 2026.
At the same time, GDP is expected to grow by 0.9% in 2024, up 30 basis points from March.
While raising the upper limit of inflation expectations, the expectation for GDP is also raised, in order to show the outside world that the eurozone economy continues to remain strong and will be stronger in the future, and inflation has been effectively controlled. These two points happen to be the two most direct problems faced by the euro rate cut.
The result of the announcement of these expectations is that the euro rate cut did not weaken the euro against the US dollar, but strengthened in the short term.
There are only two reasons for this situation:
1. The euro rate cut market expected in advance, fell in advance, and the rate cut landed and rebounded in the short term.
2. Through the policy adjustments of the European Central Bank, the eurozone's expectations for the future economy have improved, and the euro has rebounded in the short term.
In any case, the rebound of the euro is only temporary and cannot be maintained for a long time. The interest rate cut made by the European Central Bank after trying to block the hawkish remarks of Macron and others must be at the cost of a significant depreciation of the euro.
If you are interested, you can pay more attention to the euro-dollar index, as well as the situation of European and US stock markets. Once the US dollar index strengthens, euro assets will inevitably leave in increasing quantities.
For the crypto market, we can only say that there is a factor in the macro sentiment that is favorable to the risk market, but whether the crypto market can reap the dividends of this wave of interest rate cuts in Europe in the short term still requires patience.
