ECB's Bold Move: Traders Prepare for Steeper Rate Cuts Amid Trade Tensions

Traders are gearing up for steeper interest rate cuts following the European Central Bank's recent decision to cut rates, highlighting its willingness to support the euro zone economy amid trade tensions. This dovish stance triggered a fall in euro and bond yields, influencing market expectations.

The European Central Bank's recent decision to cut interest rates by 25 basis points has emboldened traders to anticipate even steeper cuts ahead, as trade tensions continue to challenge the euro zone economy. The ECB, concerned about a fragile economic outlook, has signaled its readiness to further ease policy if necessary.

Following the announcement, the euro weakened significantly, and government bond yields across Europe saw sharp declines. The ECB's communications highlighted exceptional uncertainty due to ongoing trade tensions, removing any reference to rates being 'restrictive,' a move seen as an effort to reassure markets.

With ECB Chief Christine Lagarde emphasizing the bank's commitment to addressing economic shocks, traders now estimate a high likelihood of further rate cuts by June, aligning market pricing toward more aggressive monetary policy actions throughout the year.

(With inputs from agencies.)