ECB: Lagarde Presents US Tariff Impact Estimates; Otherwise Little New Guidance
Lagarde re-iterates the March guidance unsurprisingly ("in current conditions of rising uncertainty, we will follow a data-dependent and meeting-by-meeting approach to determining the appropriate monetary policy stance"). A few other highlights:
- "ECB analysis suggests that a US tariff of 25% on imports from Europe would lower euro area growth by about 0.3 percentage points in the first year. A European response in the form of raising tariffs on US imports would further increase this to about half a percentage point. The brunt of the impact on economic growth would concentrate around the first year after the rise in tariffs; it would then diminish over time, however leaving a persistent negative effect on the level of output".
- "In the near term, EU retaliatory measures and a weaker euro exchange rate – resulting from lower US demand for European products – could lift inflation by around half a percentage point. The effect would ease in the medium term due to lower economic activity dampening inflationary pressures".
- More of the same here: "The disinflation process is well on track".... " The latest ECB staff projections expect the economy to grow by 0.9% in 2025, 1.2% in 2026 and 1.3% in 2027.These estimates are subject to considerable uncertainty, also owing to the trade policy environment".
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Historical bullets
BONDS: Schatz/Bobl Swap curve trade
- DUH5 ~5.5k at 106.705 (suggest payer).
- OEH5 ~2k at 117.13 (suggest receiver).
SILVER TECHS: Bullish Trend Condition
- RES 4: $35.736 - 1.236 proj of the Feb 14 - Apr 12 - May 2 ‘24 swing
- RES 3: $34.903 - High Oct 23 and the bull trigger
- RES 2: $34.000 - Round number resistance
- RES 1: $33.450 - 76.4% of the Oct 23 - Dec 19 ‘24 bear leg
- PRICE: $32.394 @ 08:02 GMT Feb 18
- SUP 1: $31.606/100 - 20- and 50-day EMA values
- SUP 2: $29.704 - Low Jan 27
- SUP 3: $28.748 - Low Dec 19 and bear trigger
- SUP 4: $28.446 - 76.4% retracement of the Aug 8 - Oct 23 bull cycle
A bull theme in Silver remains intact despite the pullback from last Friday’s high. Recent gains confirm a resumption of the bull cycle that started Dec 19 and sights are on $33.450, a Fibonacci retracement. Clearance of this level would further strengthen a bull theme. On the downside, key short-term support is seen at 31.100, the 50-day EMA. A clear breach of this level would highlight a potential reversal.
STIR: SONIA Futures Follow USD and EUR Counterparts Lower, Labour Data Mixed
The December/January labour market data was slightly mixed, with SONIA futures following EUR and USD counterparts lower at the open.
- Private regular wages were a little softer than expected, with the HMRC PAYE RTI data continuing to point to a downward trend in pay growth. However, this was somewhat offset in terms of market reaction by a lower-than-expected unemployment rate and higher than expected employment growth, alongside broader pressure in the rates space.
- SONIA futures are -1.5 to -3.5 ticks through the blues, off session lows at typing.
- BOE-dated OIS price 54bps of easing through year-end, around 3bps more hawkish than yesterday’s close. The next full 25bp cut continues to be priced through the June gathering.
- BOE Governor Bailey speaks in a Fireside Chat on “Preserving and enhancing open financial markets” at 0930GMT, so is unlikely to focus on monetary policy topics.
- Regional focus turns to tomorrow’s January inflation report (MNI’s preview here)
| Meeting Date | SONIA BoE-Dated OIS (%) | Difference Vs. Current Effective SONIA Rate (bp) |
| Mar-25 | 4.434 | -2.0 |
| May-25 | 4.244 | -21.0 |
| Jun-25 | 4.169 | -28.5 |
| Aug-25 | 4.022 | -43.3 |
| Sep-25 | 3.990 | -46.5 |
| Nov-25 | 3.923 | -53.1 |
| Dec-25 | 3.910 | -54.4 |
| Feb-26 | 3.887 | -56.7 |
| Source: MNI/Bloomberg |
