Market expectations for European Central Bank (ECB) rate cuts have been dialled back after a report indicated that several central banks within the ECB are still on the fence about an April rate cut, largely due to the unpredictable nature of US trade policies. Earlier in the day markets put an 85% chance of an April rate cut, which has now dropped to 65% following the report.
Read more about the ECB's potential rate cuts here: When is the next ECB interest rate decision?
German CPI numbers fell in March from February as expected. Yields and stocks recovered by the end of the day following the earlier falls on concerns of tomorrow's tariff announcement.
Overnight, the Reserve Bank of Australia (RBA) kept rates unchanged at 4.1% but reiterated that returning inflation to its target was its top priority. AUD gained marginally with the meeting perceived as mildly hawkish.
*Daily move - against G10 rates at 7:30am, 01.04.25
** Indicative rates - interbank rates at 7:30am, 01.04.25
Riding on the coat-tails of yesterday's report over the hesitancy for some ECB members to cut rates in April, today sees the release of CPI numbers from the single-block for the month of March. A sharper-than-expected drop will likely see markets further ease April's rate cut expectation and in the short term should see gains for the EUR.
US numbers are in focus this afternoon with the ISM manufacturing PMI number at 3pm seen as the most likely to cause volatility on USD. As we know recent data from the US has suggested that the growth rate could be slowing so anything to show better activity in the sector will likely be USD positive.
Tomorrow's tariff announcement is still the key driver for markets with Trump stating that the tariff levies will be lower than what other countries are charging the US, in some cases, substantially. The announcement is due at 3pm Washington time tomorrow.
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