We expect the ECB to lower the depo rate by 25bp to 2.25% on 17 April and by another 25 bps in June meeting to a terminal rate of 2%. We believe US reciprocal tariffs (courtesy Trump) and the subsequent risk-off market reaction in last 2 weeks result in April's 25 bps cut being a done deal. While Holzmann may abstain as he did in March, the rest of the committee's recent public comments imply a 25 bps cut in the 17th April meeting is a done deal. In our view, US tariffs – whether 10% or 20% – will have a noticeable impact on European growth, and we believe the hit to growth will dominate the ECB’s thinking. The degree of economic uncertainty is clearly elevated, and the combination of upside risks from fiscal stimulus and downside risks from tariff uncertainty means that various scenarios for ECB rates remain plausible. But we continue to believe ECB might prioritise saving domestic growth in light of lower Chinese economic growth & lower Eurozone inflation due to low energy prices. We have remained bullish on EUR since 15th March post the German fiscal stimulus plan announcements. The April rate cut and possibly the June cut also wont adversely impact the EUR much as global fund flows have started moving out of US assets into European assets and it is likely a long term phenomenon.
