Investors are wrong to bet the European Central Bank will raise interest rates this year while the Federal Reserve cuts, Citadel Securities said, arguing that the oil-price surge makes such policy divergence unlikely.
With the conflict in the Middle East lifting crude oil prices above $100 a barrel on Monday, interest-rate swaps show traders have fully priced in at least one quarter-point hike by the ECB by December, and are leaning toward a second one. Meanwhile, they expect the Fed to lower borrowing costs by a similar amount in that period.
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