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ECB and BoE will probably follow the Fed on interest rates




Today, within an hour, the short-term stance of monetary policies in Europe will be clarified. According to the central European time zone, the central banks in London and Frankfurt will reveal their position on interest rates in this narrow time frame starting at 2 p.m.

The ECB and BoE are expected to keep interest rates at multi-year highs as part of efforts to counter high inflation, despite indications of slowing economic growth. However, traders expect some hint of the timing of rate cuts after the Fed unexpectedly committed to three rate cuts in 2024 yesterday.

The BoE and ECB have so far not been particularly bold in doing anything different from the Fed, despite the fact that the situation in the EU area is completely different from the U.S. and the U.K. is, in turn, in a still different situation. Yet it seems, frankly, to see a group of sheep following the leader of the flock without much lucidity.

Meanwhile, European government bonds see their yields fall, starting with German 10-year bunds:

To the 10-year BTPs

And British gilts follow the same trend:

The charts move practically in parallel, seeming to see photocopies of the same bond, only with very little variation. Paradoxically, the banality of central bank managers is high, no surprises are to be expected, and the markets, which play and make money by anticipating decisions, have understood this very well.

Of course, if the next data were different, perhaps with a strong recovery in GDP, then there could be changes in these interest rate trends as well, but as things stand, this seems difficult.

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