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The ECB is currently at a crossroads. The consensus stands at a 50/50 rate cut, however, estimates increased from 10 basis points to 20 basis points.
The question here is whether Lagarde’s call on EU leaders and the latest emergency cut from the BoE make a difference regarding tomorrow’s decision.
Christine Lagarde’s Faces First Critical Test
Just about four months into her presidency, and given the fact that downside risk from the trade wars has deteriorated, one would expect Lagarde to announce that things have brightened up for the European economy.
On one end, this is correct, but no one is focusing on economic indicators right now.
The bitter reality is that she has a huge task at hand; join the other central banks with a 50% cut, or take a softer approach to cut.
Well, the markets expect the ECB president to take aggressive measures and cut interest rates. But how deep the cut will be is what will determine the euro’s fate.
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