Federal Reserve Faces Subpoena Delay Amid Investigation Into Chair Jerome Powell 
RBI Holds Repo Rate at 5.25% as India’s Growth Outlook Strengthens After U.S. Trade Deal 
China Extends Gold Buying Streak as Reserves Surge Despite Volatile Prices 
BOJ Rate Decision in Focus as Yen Weakness and Inflation Shape Market Outlook 
JPMorgan Lifts Gold Price Forecast to $6,300 by End-2026 on Strong Central Bank and Investor Demand 
BOJ Policymakers Warn Weak Yen Could Fuel Inflation Risks and Delay Rate Action 
The FX market continues pricing a high probability of an additional 10 bps rate cut by the ECB in H1 2017 (see graph).
As per ECB official, easing monetary policy by rates cut measures again would require a diverse worsening of the medium-term inflation outlook.
Such a scenario is not impossible but quite unlikely in the coming months, due to the resilience of the European economy and upcoming base effects on headline inflation.
Moreover, deep rate cuts seem definitely excluded, given their negative side effects and potential FX impact, which would be at odds with G20 commitments.
This implies limited downside potential for EUR rates.
A durably accommodative status quo from the ECB implies value in leveraged conditional rolldown trades in the belly of the EUR curve, where rates have the highest chances to remain below forwards.
Given floored ECB key rates and limited potential for EUR rates to decrease, we’ve been cosy enough to recommend 1x1.5 receiver ratio spreads with downside breakevens significantly below April 2015 lows.
