EUR: Rate differentials move to the widest of the year Two-year EUR:USD swap rate differentials are moving to the widest of the year near 138bp, following remarks from Christopher Waller. At the same time, some flash national CPI data for March (Spain data released yesterday) has come in lower on a core basis and firmed up market expectations that the European Central Bank will cut rates at the 6 June meeting. For reference, we see March inflation data from Belgium today and France and Italy tomorrow. The market now attaches an 85% probability to an ECB rate cut in June but only a 57% probability to a similar move that month by the Fed.  We suspect that if it were not for month-end portfolio re-balancing flows, EUR/USD would be trading below 1.0800 now. And that looks the risk heading into tomorrow's release of February core PCE inflation data for the US, which is expected at a sticky 0.3% month-on-month. Under 1.0800 support, we could see EUR/USD heading to 1.0780 and perhaps 1.0750. However, one month EUR/USD traded volatility below 5% suggests trading conditions will continue to be sticky.