The markets currently expect the ECB to continue its sequential easing with a 25bp rate cut in December. We still expect a 50-bps cut in it’s 12th Dec meet considering the weak growth outlook and a much better-behaved inflation profile in Eurozone. If it is only a 25-bps cut, we expect a softer tone on restrictiveness. We expect the Governing Council to move away from its language on "sufficiently restrictive". Our forecast continues to call for consecutive 25bp cuts until June next year, when the deposit rate will reach 2.0%. if economic data continues to worsen, we might even see a 50 bps cut by ECB in Q1CY25 itself. Recent PMI data has been very weak and service inflation nos have behaved better than expected. On the fiscal side, considering the recent political issues in France & Germany, fiscal impulse to growth will be at best neutral. So only monetary tools can be used to counter the weak growth narrative in Eurozone. We continue to expect EURUSD moving towards parity some where by mid CY25 both because of interest rate differentials as well as growth rate differentials from US.
