There’s a growing certainty that the ECB will cut rates by 25bps later today and in fact there’s also speculation that they might go one step further and cut by 50bps. One of the bigger UK banks is of the opinion that we get a 50bps cut and they obviously conclude that this would send the EUR tumbling.
A professional trader friend of mine, let’s call him The Dinosaur, isn’t so sure. He thinks that the ECB might indeed cut by 50 bps but that this could be the precursor to a big EUR/USD rally. His argument is that such a 50 bps cut would be followed by a rally across equity markets and a substantial follow-up from the EU summit (the 15th by the way). In other words, he’s hoping to buy a 100/150 dip if/when the ECB cut and then ride the 400/500 risk-on rally on the back of the subsequent equity rally and summit developments. Sounds like a plan.
