There is no reason for self-complacency in Europe.We must be vigilant now to both directions.We have to closely monitor geopolitical developments and price developments in energy markets.The trade war seems to dampen inflation in the Euro Area rather than increase it.
The ECB has now reached the mid-point of their neutral interest rates band (1.75%-2.25%). There is a will to cut one last time and get to the lower band but they are now taking a pause at least until September to see how the data evolves throughout the summer.
The market is fully pricing in a 25 bps cut for December.
This article was written by Giuseppe Dellamotta at www.forexlive.com.