The European Central Bank (ECB) is widely anticipated to implement its seventh consecutive interest rate cut on Thursday, with the decision expected at 12:15 GMT. Markets forecast a 25 basis point reduction in the deposit facility rate, bringing it down to 2.00% from the current 2.25%. The rate announcement will be followed by updated quarterly economic projections and ECB President Christine Lagarde’s press conference at 12:45 GMT.
The move comes as inflation across the Eurozone trends toward the ECB’s 2% target. According to Eurostat, the Harmonized Index of Consumer Prices (HICP) increased by 1.9% year-on-year in May, down from April’s 2.2%, while core inflation eased to 2.3% from 2.7%. These figures have strengthened the case for further easing.
However, dissenting voices within the ECB have advocated for caution. Prominent policymakers such as Robert Holzmann, Isabel Schnabel, and Joachim Nagel have expressed concern about the uncertain economic outlook, especially in the context of escalating trade tensions between the United States and the European Union.
In late May, US President Donald Trump reignited trade tensions by threatening 50% tariffs on EU goods, citing stalled negotiations. Though implementation was delayed until July 9, additional tariffs on steel and aluminum — set to double to 50% — are scheduled to take effect from June 4. These developments have raised fears of broader economic fallout across Europe.
With inflation moderating but geopolitical risks mounting, Lagarde’s post-decision comments and the ECB’s revised economic forecasts will be closely watched for signs of future monetary policy direction. Analysts at TD Securities anticipate a 25 basis point cut, accompanied by a hawkish tone signaling a potential pause in July. They expect downward revisions to growth and inflation projections due to global trade headwinds.
Impact on EUR/USD
The Euro has posted solid gains against the US Dollar this year, aided by weakness in the greenback amid fears of a US economic slowdown. However, in the lead-up to the ECB decision, EUR/USD has pulled back slightly as USD demand rebounds.
If Lagarde or the ECB’s projections signal continued disinflation and justify further rate cuts, EUR/USD may extend its recent decline from six-week highs. Conversely, any indication of upside inflation risks or a cautious stance on future easing could lift the Euro.
Technically, EUR/USD remains supported above major daily moving averages, with the Relative Strength Index (RSI) holding firm near 56. According to FXStreet’s Dhwani Mehta, resistance lies at 1.1456, with further upside targeting 1.1500 and the April 21 high of 1.1574. Key support levels are seen at 1.1285 (21-day SMA), 1.1220 (50-day SMA), and the 1.1150 psychological mark.
As markets await the ECB’s next move, all eyes will be on how policymakers balance disinflation progress against intensifying external risks.
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