Vuca Treasury Ltd

📉 ECB cut interest rates again last week! Last week, the ECB cut rates to 3%, taking rates down by a cumulative 1.0% since the summer.  The forward curve implies further 0.25% rate cuts at each of the first 4 meetings in 2025, beginning on January 30th. The market forecasts that the terminal rate for Euribor will dip below the 2% inflation target, staying there until 2027, and then hover near this 2% level to 2029. This means that hedges products are now priced off negative or close to zero real interest rates for the next five years! At VUCA Treasury, we're actively helping EUR borrowers hedge existing debt and pre-hedge interest rate hedges set to roll off in the next 12 months. 👉 Curious how your peers are navigating these improved rates? Contact our team at [email protected] for more insights. #ECB #rates #forecast #curve #euribor

ECB to cut in December but Bank of England on hold? All eyes are on the major central banks this month. The ECB meets on December 12, with a 0.25% rate cut fully priced in, and a chance of a jumbo 0.50% cut in the mix. The Fed follows on December 18, with a 0.25% rate cut largely priced in. Meanwhile, the BOE is scheduled for December 19, and the market anticipates no change until February, aligning with their quarterly update on inflation and the economy. Notably, the Bank of Japan, also meeting on December 19, might diverge from the trend with a potential 0.25% rate hike. Looking into 2025, the market predicts the ECB will maintain an aggressive stance with up to five 0.25% rate cuts within the first four meetings. This could bring the ECB Depo rate down to 1.75%, and the 3-month Euribor rate below 2%, dipping back into negative real rate territory if inflation holds around 2%. In contrast, the UK market expects a more measured approach. A 0.25% rate cut is almost priced in for February, with another anticipated in May. The OBR’s latest forecast sees 2% growth in 2025 and a slight uptick in inflation to 2.6% on average. The BOE's gradual reduction strategy aims to bring the Base Rate/SONIA close to 4% by the end of 2025. However, much hinges on the unpredictable global trading environment, especially in a Trump 2.0 world. For insight into how this translates into hedging strategies for our clients, contact the team at [email protected] #Trump #ECB #BOE

ECB to cut by 0.50% in December? Eurozone business activity fell unexpectedly in November. A 4th rate cut of 0.25% from the ECB at their upcoming policy meeting is fully priced in and the market is actually pricing in a 68% probability that the ECB will deliver a larger 0.50% cut. The euro also came under pressure, trading briefly to a low of 1.0338 against the dollar and 0.8270 (GBPEUR1.2090) against the pound. The activity survey that sparked this morning’s volatility was the respected Eurozone Purchasing Managers’ Index (PMI). The composite component dropped to a 10-month low of 48.1 in November, below the 50 level that separates growth from contraction. Markets had anticipated no change from October’s 50. The Services sector also fell through the 50 mark returning 49.2 against expectations of 51.8 Markets expect the ECB to front end rate cuts and prices for all hedging products (Swaps, Caps etc) are now pricing in 6 rate cuts between now and December 2025, giving borrowers a clear incentive to hedge. For more information, please contact the Vuca team at [email protected] #euro #ecb #rates

The dollar has been reinvigorated following Trump's election in the US. In contrast, political strife in France initially and now Germany is weighing on the euro-is a test of parity on the cards for EURUSD? #dollar #euro #trump

The pound was stable but rates sold off after first Labour budget

Wholesale diesel prices in the UK have fallen to a 3 year low on the combination of the falling oil price and stronger sterling. Given the positive correlation between energy/fuel costs and inflation, this is good news as it gives the Bank of England more room to deliver a rate cut in November #diesel #commodities #BOE #inflation #ratecut

📈 Pound Breaks Above €1.20- highest level since 2022 📉 On the eve of the anniversary of the infamous Liz Truss mini-budget, the pound has traded back above €1.20 against the euro, a level last seen in April 2022, and reflects a renewed sense of optimism for the pound. A new (stable) government, weakening economic fundamentals in Europe-especially Germany- and higher UK interest rates are all factors in the improved sentiment around sterling. #Forex #GBP #Euro #Economy #Finance #Investment

📉 UK Curve Inversion Alert 📉 The spread between the UK Base Rate and the 2-year fixed rate has dropped below -1.0%.  The last time the curve hit such an inversion, much of the discount was reversed within 4-5 months. ⚠️ With the market anticipating rate cuts through 2025, it’s a good time to assess your exposure. Reach out to Vuca Treasury for expert advice on managing risk. #interestrates #hedging #UKeconomy #treasury #finance

📉 UK Curve Inversion Alert 📉 The spread between the UK Base Rate and the 2-year fixed rate has dropped below -1.0%.  The last time the curve hit such an inversion, much of the discount was reversed within 4-5 months. ⚠️ With the market anticipating rate cuts through 2025, it’s a good time to assess your exposure. Reach out to Vuca Treasury for expert advice on managing risk. #interestrates #hedging #UKeconomy #treasury #finance