Markets reduce ECB rate hike bets to 6% as oil prices decline and Lagarde signals cautious policy stance.
The Euro fell to 0.8625 against the British Pound in early European trading Monday, pressured by fading expectations for further ECB rate hikes. The ECB raised its deposit rate by 25 basis points to 2.25% in June, but President Christine Lagarde indicated last week that aggressive responses to Middle East conflict spillovers are unnecessary.
Traders have scaled back rate hike bets, with markets pricing a 94% probability of no change in rates, per ECB Watchtool. Lagarde’s remarks at the ECB’s annual forum later Monday may provide clues on policy direction. Meanwhile, UK political uncertainty and weak economic data could limit GBP gains, supporting the EUR/GBP cross.
Oil price declines have also contributed to reduced inflation concerns, further dampening ECB hike expectations.