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|16 May, 2019

Money market bets on euro zone rate cut by year-end on the rise

The pricing in of a rate cut has crept up in recent week

Sign of the European central Bank (ECB) is seen ahead of the news conference on the outcome of the Governing Council meeting, outside the ECB headquarters in Frankfurt, Germany, March 7, 2019.

Sign of the European central Bank (ECB) is seen ahead of the news conference on the outcome of the Governing Council meeting, outside the ECB headquarters in Frankfurt, Germany, March 7, 2019.

Reuters/Kai Pfaffenbach

LONDON - Euro zone money markets are reflecting rising expectations for an interest rate cut from the European Central Bank by year-end, given growing concerns about the growth outlook and the impact of global trade tensions.

Eonia money market futures dated to the ECB's December 2019 meeting on Thursday were pricing in around three basis points worth of interest rate cuts, up from around two bps in April . 

According to analysts, this is roughly the same as saying the markets price in around a 30% chance of a rate cut.

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The pricing in of a rate cut has crept up in recent weeks and marks a sharp shift from last year when markets were positioned for a rate increase this year as the ECB looked to normalise its unprecedented monetary policy.

(Reporting by Dhara Ranasinghe, Editing by Abhinav Ramnarayan) ((Dhara.Ranasinghe@thomsonreuters.com; +442075422684;))

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