Euro settles as ECB talks down rate movement expectations

• The Euro tumbled against the high-stepping US Dollar on Tuesday.
• ECB’s Senteno, Villeroy, and Nagel reiterate familiar policy stance.
• ZEW Economic expectations in Germany improved, because of rate cut hopes.

The Euro (EUR) mixed on Tuesday, holding mostly steady against its peers but seeing steep declines against the US Dollar (USD). European Central Bank (ECB) officials continue to tow the company line, reiterating that it’s too soon for the ECB to pivot into rate cuts.

Euro area data was thin on Tuesday, and markets will be focusing on headlines from the World Economic Forum (WEF) in Davos, Switzerland where policymakers are meeting for a five-day retreat.

Daily digest market movers: Euro tumbles against US Dollar as policymakers talk down markets

• The euro area’s ZEW Economic Sentiment Survey in January declined slightly from 23.0 to 22.7, but beat the forecast decline to 21.9.
• Germany’s ZEW Economic Sentiment Survey improved in January, jumping from 12.8 to 15.2 versus the forecast 12.0.
• Germany’s ZEW Current Situation Survey deteriorated further, dropping from -77.1 to 7.3 versus the expected uptick to -77.0.
• ECB’s Valimaki: ECB will continue to be data-dependent, better to wait longer than to cut too early.
• Can’t jump the gun too early on rate changes.
• Restrictive monetary policy still called for according to ECB’s Valimaki.
• ECB’s Centeno: Inflation is coming down sustainably, shouldn’t be worried about a resurgence in inflation rate.
• ECB needs to be prepared for all topics, including rate cuts, according to ECB’s Centeno.
• ECB’s Villeroy: Still too early to declare victory over inflation.
• ECB’s Villeroy reaffirms that the ECB’s next move will be a rate cut sometime this year, but inflation outlook needs to see 2% first.
• The ECB is more patient on rate cut outlook than markets, according to ECB’s Villeroy.