European Central Bank’s turn to blink: Raises key interest rate from negative to negligible
Madame Christine Lagarde, currently head of the European Central Bank (ECB), was in such a rush to quit her previous job as head of the International Monetary Fund (IMF, where she lent a record $44 billion to serial defaulter Argentina), that replacing (Super) Mario Draghi at the ECB seemed a shoe-in. A decade on from the Greek and Southern European sovereign debt crisis, today the Eurozone also has to face Italy with no head of government (because popular Mario’s political coalition collapsed), consumer confidence at a record low and Russian gas via the Nordstream 1 pipeline seriously constrained. So the ECB decides to hike the key rate by a marginally higher than expected 50 basis points instead of just 25. Great! The first chart shows the reaction in the front-month Euribor futures contract which dropped from a high at 99.230 this morning to 99.025.
Interestingly further out contracts, the red and the green ones as they’re called, moved less, the December 2022 dipping from 98.620 to 98.460; June 2023 from 98.340 to 98.220 and June 2024 from 98.340 to 98.240. One way or another you can see that all contracts are within 10 or 20 basis points from where they were before today’s interest rate decision and above their June low point. Added to that, volumes have been shrinking steadily in July.
Plus ça change!
FEIU2
FEIZ3
Charts courtesy of Metastock Xenith by Refinitiv
Tags: ECB, Euribor, Eurozone, expectations
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