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EUR Proves Resilient to Fringe Views for Faster Rate Cuts

FOREX
  • Modest early GBP outperformance has EUR/GBP reversing a small part of this week’s gains – with Tuesday’s 0.8536 low (printed alongside the 4pm WMR fix) underpinning the daily low. The return lower for the cross reinforces the 50-dma at 0.8555 as S/T resistance, having contained prices earlier this month, and twice more this week.
  • Nonetheless, we noted yesterday that GBP/USD’s intraday range was extremely tight – and this is unsurprisingly feeding into subdued short-term vols – GBP/USD’s 1w realised vol ebbed to 4.7 points at the Wednesday close – the lowest since August 2021. This has boosted the implied-realised 1w vol premium to near 1.5 points as the contract captures next week’s FOMC.
  • Dovish tones from one of the ECB Governing Council's most dovish members failed to move the needle, with Greek representative Stournaras voicing his preference for two rate cuts by Summer - which still seems a minority view.
  • NZD is modestly the firmest performer, with SEK the weakest, although price action is largely well contained.
  • Looking ahead, the weekly US jobless claims release, retail sales and PPI figures will take market focus - with a litany of ECB speakers also on the docket. ECB's Lane, Schnabel, Knot, de Cos, de Guindos and Stournaras are all set to speak - and markets will be looking to gauge the current pricing for a first ECB rate at the June meeting - with April still seen as a likely hold.
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