From a Deutsche Bank client note taking a look at the history of the relationship between Fed rate cuts and those from the European Central Bank (and Germany's Bundesbank before them):
- the potentially imminent European easing cycle has raised some eyebrows in terms of timing and how much they can cut before the Fed start their own easing cycle.
- we investigate the Fed Funds vs. the German Bundesbank rate before 1999 and the ECB rate thereafter
- table ... shows the dates of the start of easing cycles in both regions over the last 65 years, and calculates the lag between the two
- It highlights that over this period, the Bundesbank/ECB have not eased before the Fed, apart from in 2011 when the ECB cut rates due to the Sovereign crisis when the Fed was already at zero and didn’t cut rates further. Outside of that period (which was also complicated by QE on both sides of the Atlantic), the Fed has had more easing cycles and where they coincide, they have always previously been the first to cut.
- So assuming the ECB does cut rates next month as expected, and the Fed remains on hold for at least the next several months before easing, it will be a unique event in modern times.
I dunno about anyone else but the June cut from the ECB seems close to a done deal. And, yes, it may be bordering on unique. But, if data dependence is a thing then its not going to surprise anyone (maybe the folks at TV Tokyo perhaps?). Which will prevent the EUR from being battered too much.
