Money markets increase bets on ECB rate cuts on U.S. tariff fears
March 28 (Reuters) - Money markets increased bets on future European Central Bank rate cuts on Friday as investors braced for U.S. reciprocal tariffs on April 2 and after March inflation data from France and Spain came in lower than anticipated.
Money markets priced in an 80% chance of a 25 basis points (bps) ECB rate cut in April from around 50% a week ago and a depo rate at 1.9% from around 1.95% late Thursday.
"It seems likely that the ECB will conclude that the downside risks from escalating trade tensions are materialising," said Christoph Rieger, strategist at Commerzbank, referring to the impact of tariffs on the central bank policy path.
Bund yields DE10YT=RR, the euro area’s benchmark, dropped 6 bps to 2.708%, their lowest level since March 5.
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