The ECB
The following a surprise move by Fitch on Tuesday to downgrade Italy by one notch to BBB- with a stable outlook. S&P had kept Italy on at BBB late last week. Fitch explained its decision in the context of the rising trajectory of Italy’s debt-to-GDP ratio. Nonetheless, continues to trade in a very tight range.
Cuts have priced out, and the focus will be on the Pandemic Emergency Purchase Programme. Also, month-end rebalancing interest could have an impact on price action in the short-term as well, as US assets once again outperformed their European counterparts.
The market is pricing in around a 50% probability of a 10bp rate cut from the ECB by the summer. I think that way too much as the ECB might prefer to save some bullets and only cut rates if the EUR/USD moved into the 1.15-1.17 range.
Markets
European equities opened higher on Thursday, but the sentiment is wobbling early given some disappointing earnings. And guidance from Shell (LON:), which has cut its…
