Mysterious trader increases bets, betting that the European Central Bank will cut interest rates to 1% within the year.

A options trader is currently betting on the European Central Bank to slash its benchmark interest rate to 1% within the year, in an attempt to gain nearly eight times the excess profits compared to the initial investment. This derivative contract is linked to the three-month Euro Interbank Offered Rate (Euribor), and is considered the most aggressive interest rate betting in the current market, both in terms of trade size and target interest rate. If policymakers at the European Central Bank implement a 25 basis point rate cut at the remaining seven monetary policy meetings this year, this contract will generate a huge profit of 12.5 million euros (approximately 13 million US dollars). This aggressive bet contrasts sharply with the general market expectations. The interest rate futures market shows that the market currently expects the European Central Bank to only cut rates three more times this year. Last month, the bank had already cut rates by 25 basis points to 2.75%. This options contract is an extension of a large-scale bet on rate cuts earlier in the year. The trading plan shows that if policymakers commit to maintaining loose policies until 2026 and accumulate rate cuts of 150 basis points by the end of the year, the position will maximize profits. The latest economic data provides support for further rate cuts. Data released by the European Central Bank on Tuesday showed that wage growth in the Eurozone in the fourth quarter of last year slowed significantly from 5.4% in the third quarter to 4.1%, a trend that is expected to gradually ease inflationary pressures in the service sector. The current service sector inflation rate is still hovering around 4%, causing concerns for policymakers. Meanwhile, the Eurozone's business activity index in February has nearly stagnated, exacerbating concerns about the ongoing economic downturn. Joachim Nagel, the President of the German Central Bank, expressed similar views in the annual report released on Tuesday, stating that the German economy is in a stubborn stagnation state. It should be noted that most of the trading in the options market is anonymous, making it difficult to identify the specific institutions or traders participating in this transaction.