As expected, the ECB lowered its interest rates by another 25 basis points to 2.0% yesterday. However, the exchange rate only really started to move during the press conference, Commerzbank's FX analyst Volkmar Baur notes.
Only one further ECB rate cut is expected
"Although the ECB significantly lowered its inflation forecasts and now expects a price increase of only 1.6% in the coming year, Christine Lagarde sounded surprisingly hawkish. According to the President of the Central Bank, the ECB is well positioned with its current interest rate to support growth and bring inflation back below the 2% mark. For the moment, this does not sound as if further interest rate cuts are planned."
"Lagarde also had to admit that not all council members had voted in favor of another cut in the key interest rate, even though the move was based on a broad consensus. It could therefore be that the statements were also intended to appease the minority who were probably against a move, or at least expressed reservations."
"Before the ECB meeting, the market was speculating about two further interest rate cuts this year, but after the meeting, only one further cut is now expected. As a result, the EUR/USD gained ground yesterday and almost reached 1.15. It is unlikely to break this mark today unless the US labor market report is very weak, which would weigh on the USD."
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD: Next on the upside comes 0.6690
AUD/USD rapidly left behind Friday’s pronounced decline and regained strong impulse on Monday, surpassing the 0.6500 barrier with certain conviction and reaching new peaks around 0.6550. The move higher in spot was propped up by extra losses in the US Dollar and a generalised risk-on mood.
EUR/USD keeps the bid bias in place
EUR/USD surpassed the 1.1600 barrier once again, although it failed to extend the move further north in quite a firm start to the week. The renewed weakness around the Greenback allowed spot and the risk complex in general to regain composure and leave behind the recent drop.
Gold slips back to daily lows, looks at $3,380
Gold keeps its offered stance on Monday, and is now drifting lower to the area of daily troughs around $3,380 per troy ounce against the backdrop of persistent risk-on sentiment and shrinking effervescence in the Middle East. Furthermore, the tepid bounce in US yields across the board also contributes to the decline in the precious metal.
Ripple Price Prediction: XRP flaunts potential breakout to $3.00 on surging risk appetite
Ripple (XRP) flaunts a short-term bullish outlook as part of the recovery from the sell-off encountered last week after Israel launched attacks on Iran, escalating geopolitical tensions in the Middle East.
Chinese data suggests economy on track to hit 2025 growth target
China's May data was mixed with strong retail sales, but soft readings on fixed-asset investment and property price. Overall, though, data suggests that China remains on track to achieve its growth target in the first half of 2025.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.