Opening
Dollar weakness — driven by soft US consumer confidence data on Friday — has extended into the new week, with EUR/USD reaching 1.1685 in early trading before settling near 1.1665. The move is carrying the entire European equity complex higher in a broadly coordinated fashion: AEX, DAX, CAC and FTSE are all positive, which is relatively rare and reflects genuine risk appetite rather than rotation.
The macro backdrop has shifted meaningfully since the start of May. A month ago, the ECB June meeting was seen as uncertain. Today, OIS pricing implies 90% probability of a 25bp hike to 2.25%. The question has moved from "whether" to "what comes after June" — and that question is keeping the rally in check despite the positive FX backdrop.
What moved
- EUR/USD +0.31% to 1.1665: Dollar index (DXY) at 99.8 — lowest since February. The structural USD weakness narrative is regaining traction as US growth differentials narrow vs Europe.
- AEX +0.52%: Broad-based. Philips, Wolters Kluwer, Heineken all gaining. ASML steady after last week's consolidation. ING +0.8% on rate path optimism.
- DAX +0.41%: German chemical names outperform — BASF and Evonik benefitting from lower input energy costs (gas prices down 4% over the past week despite crude strength).
- Shell -0.18%: The only meaningful decliner among large AEX names; profit-taking after last month's upstream outperformance. Not a thesis change.
What to watch today
ECB speakers: Isabel Schnabel (known hawk) and Klaas Knot (Dutch governor) both speak today. Their framing of the June decision — specifically whether they signal openness to pausing after June — will be closely watched.
Eurozone M3 money supply (10:00 CET): A leading indicator for credit growth. The ECB has been watching M3 carefully as a check on whether rate hikes are passing through to loan demand. A significant deceleration would strengthen the case for pausing at or after June.
US consumer confidence (16:00 CET): The driver of Friday's dollar weakness. A second consecutive weak print would extend EUR/USD strength.
The number
90% — OIS market probability of an ECB 25bp hike on June 11, taking the deposit rate to 2.25%. The 10% residual mostly reflects insurance against a sudden deterioration in Eurozone bank funding conditions rather than genuine expectation of a hold. Once a central bank reaches 90% pricing, the meeting itself rarely surprises — what surprises is the forward guidance language.