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ECB Cuts Interest Rate By 25 BPS, Bitcoin ROI Improves During EU Hours

June 6, 2024

For the first time in five years, the European Central Bank has slashed down its interest rate. From an all-time high rate of 4%, the number is now down to 3.75%. Announcing the same via a post on X, Europe’s apex bank underlined,

“We cut our key interest rates by 0.25 percentage points. Keeping interest rates high for nine months has helped push down inflation. It is now appropriate to moderate the degree of monetary policy restriction.”

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Since the Governing Council meeting in September 2023, inflation has dropped by more than 2.5 percentage points, leading to an “improved” outlook - price pressures have weakened, and inflation expectations have declined at all horizons.

The latest ECB announcement comes on the heels of a similar move announced by Canadian regulators. In fact, Canada became the first G7 nation to cut interest rates in the current cycle. Other countries like Sweden and Switzerland, on the other hand, also trimmed their rates this year.

Per economists, this is just the beginning of a new dawn. Katherine Neiss, the Chief European Economist at investment firm PGIM, for instance, is "reasonably confident" that the ECB would cut rates further over the summer or autumn. Ultimately, this would bring down the interest rates in the Eurozone to 3.5% or lower, by the end of 2024. She added,

"Growth is encouragingly recovering from the recession that the euro area went through towards the end of last year, but it's still sluggish."

The US Federal Reserve is also expected to follow the same path going down the late. Stronger-than-expected rates this year have compelled it to keep the strings tightened so far.

How Has Bitcoin Been Reacting?

During the initial few days of this week, BTC’s ROI during both US and EU trading hours was negative. However, the situation has eased of late. The gap has been narrowing down, with returns during the American session creeping back up from the negative to breakeven territory. EU returns, on the other hand, have witnessed a 180-degree flip on the back of the refined macro sentiment, with the number jumping above 2% over the last couple of days.

Source: Velo Data
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