EUR flows: EUR not much changed on ECB

EUR/USD is not much changed in reaction to the ECB rate cut and new set of forecasts. Inflation projections have been revised lower due to lower energy prices and a higher EUR, but growth forecasts are unchanged with the ECB noting that rising government investment in defence and infrastructure will increasingly support growth over the medium term, even though trade tensions may have a negative short term impact.

EUR yields have moved a little lower in response, likely reacting to the lower inflation forecasts, but we would see the growth forecasts as being perhaps a bit more optimistic than expected with more emphasis on the medium term impact defence and infrastructure spending than the short term negative effect of trade problems. Nevertheless, there isn’t enough change in the statement or forecast to have a significant EUR impact, and EUR/USD continues to be much more focused on the upcoming US tariff decisions than the finer points of ECB policy over the next year.