European Economics and Rates Strategy

RBC's daily commentary highlights the ECB's hawkish rate hike to 2.25% and potential for further tightening. It also analyzes UK economic data and the political impact of the upcoming Makerfield by-election.

Key Takeaways

• 1.The ECB raised its deposit rate to 2.25% and signaled hawkish projections, leading RBC to recommend selling September Euribor straddles.
• 2.UK economic output fell 0.1% in April, largely driven by service sector contractions linked to Middle East conflict-related event cancellations.
• 3.The Makerfield by-election is viewed as a high-stakes event for UK politics with potential leadership implications for the Labour Party.

Table of Contents

• Overnight news
• Data and events
• June ECB review – We’re not at target anymore – more hikes are coming!
• What to Watch For: The Week Ahead in Europe