ECB Minutes don’t change rate cut math against the Fed

The euro held onto its gains against the dollar as ECB minutes for the June 5-6th meeting highlighted policy makers are ready to deliver more stimulus as the debate begins on how to use adjust their current tools. Some called for TLTRO III to be more aggressive in supporting the economy, reminding markets that all tools will be used if we see a greater downturn in the eurozone economy. ECB rate cuts expectations pared slightly following the policy minutes release.

The euro could see further gains here as market participants see the Fed possibly embarking on a much more aggressive rate cut trajectory than the ECB. Over the next 12 months, markets could see the Fed delivering 100 basis points in rate cuts while the ECB may only deliver half of that total. The common currency is also benefiting from slightly higher revisions with German EU-harmonized inflation readings.