empty
06.06.2025 10:54 AM
ECB Meeting Results and Christine Lagarde's Press Conference

The euro responded with a significant rise following the ECB's decision to cut interest rates. But why did this happen? Let's break it down.

The key reason behind the euro's rally was ECB President Christine Lagarde's statement that the European Central Bank is ending its interest rate reduction campaign after the eighth cut this year.

This image is no longer relevant

Since the eurozone is suffering from U.S. tariffs, the deposit rate was lowered by a quarter of a percentage point to 2% on Thursday — as predicted by all economists. The ECB described inflation as being close to its 2% target. However, the ECB's optimism contrasts with growing concerns about economic growth in the region. A global economic slowdown, exacerbated by trade wars and geopolitical tensions, is putting pressure on the export-driven economies of the eurozone. Although the rate cut is intended to stimulate lending and investment, it may not be sufficient to counteract external negative factors. Moreover, the effect of the rate cut could be limited, given that many banks already have excess reserves. In such circumstances, reducing deposit costs might not significantly boost lending but rather lead to asset reallocation.

During the press conference, Lagarde stated that the ECB is nearing the end of its rate-cutting campaign. "We are approaching the end of the monetary policy cycle that was a response to severe shocks, including COVID-19, Russia's military special operation, and the energy crisis," President Christine Lagarde told journalists in Frankfurt. "At the current level of interest rates, we believe we are well positioned to navigate the uncertain conditions ahead."

Against this backdrop, money markets reduced bets on additional cuts this year and no longer see another quarter-point reduction as a given. Short-term bonds led the decline, lifting the yield on German two-year bonds by six basis points to 1.86%, a two-week high.

With inflation below the ECB's target for the first time in eight months — and only the second time since 2021 — officials increasingly believe their mission to curb the region's biggest price surge is nearly complete. The major uncertainty remains U.S. President Donald Trump's trade policy, which has undermined trust in the U.S. and clouded global growth, pushing officials to call for a pause in the easing cycle.

The unpredictability of the American leader's actions, the imposition of tariffs, and threats of further increases have created an atmosphere of uncertainty, restraining investment and economic activity worldwide. This uncertainty forced the central bank to take unprecedented measures, including rate cuts, to support economic growth. However, the effectiveness of these measures is limited when the core issues are weak demand and a lack of confidence in the future. Whether European authorities will conclude a trade agreement with the U.S. by July 9 remains a complex question — and such an outcome seems unlikely. Under these conditions, the prospects for eurozone economic growth remain uncertain.

The ECB's new quarterly forecasts account for inflation below the 2026 target, at 1.6%. The economy is expected to grow by 1.1% next year — slightly less than previously forecast. The ECB noted in its statement that although trade uncertainty will likely weigh on business investment and exports, fiscal stimulus should support growth later. Highlighting the extreme uncertainty, the ECB presented moderate and severe scenarios alongside its baseline forecast for the 20 eurozone countries.

The moderate scenario envisions significant growth improvement compared to the baseline, with limited inflation impact. Under the harsher scenario, growth would be weaker, as would inflation, since the upward pressure from higher U.S. import tariffs would be more than offset by weaker demand.

Lagarde described the risks to the economy as still tilted to the downside. However, a strong labor market, rising incomes, and easier financing conditions should help consumers and firms withstand the effects of a volatile global environment.

According to Lagarde, inflation is expected to return to the target by 2027, despite lower energy prices and a stronger euro, both of which will put downward pressure on inflation in the near term.

As for the current technical picture of EUR/USD, buyers now need to secure the 1.1453 level. Only then will they be able to target a test of 1.1490. From there, a climb to 1.1530 becomes possible, although achieving this without support from large players will be challenging. The ultimate target is 1.1570. If the instrument declines, serious buying activity is expected around 1.1407. If there's no buying interest there, it would be preferable to wait for a renewal of the 1.1361 low or to open long positions from 1.1314.

As for the current technical picture of GBP/USD, pound buyers need to overcome the nearest resistance at 1.3581. Only then will they be able to aim for 1.3613, although breaking above this level will be difficult. The ultimate target is 1.3659. If the pair declines, bears will attempt to seize control at 1.3544. If they succeed, a breakout below this range will deal a serious blow to the bulls' positions and push GBP/USD down to a minimum of 1.3505 with the prospect of reaching 1.3470.

Summary
Urgency
Analytic
Pavel Vlasov
Start trade
Gana con los cambios en el valor de las criptomonedas con InstaForex.
Descarga MetaTrader 4 y abre tu primera operación.
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    UNIRSE AL CONCURSO

Recommended Stories

Análisis del par GBP/USD. El 13 de agosto. A la espera del viernes...

El par de divisas GBP/USD volvió a negociarse de forma bastante apática el martes. Por la mañana, en el Reino Unido se publicaron datos sobre desempleo y salarios, pero resultaron

Paolo Greco 07:38 2025-08-13 UTC+2

Análisis del par EUR/USD. El 13 de agosto. Trump y China llegaron a un acuerdo. Otra vez temporalmente.

El par de divisas EUR/USD volvió a negociarse de forma bastante tranquila. Por un lado, el par no se queda inmóvil, pero al mismo tiempo la volatilidad es baja

Paolo Greco 07:38 2025-08-13 UTC+2

Análisis del par GBP/USD. El 12 de agosto. Una inflación que ya no decide nada.

El par de divisas GBP/USD el lunes se movió de forma muy débil. Como ya dijimos, el trasfondo fundamental sigue siendo fuerte y resonante, pero los traders parecen haberse tomado

Paolo Greco 06:45 2025-08-12 UTC+2

Análisis del par EUR/USD. El 12 de agosto. Nunca había pasado, y ahora otra vez.

El par de divisas EUR/USD el lunes continuó negociándose de forma súper tranquila. El trasfondo macroeconómico estuvo ausente por segundo día de negociación consecutivo, y el trasfondo fundamental el mercado

Paolo Greco 06:45 2025-08-12 UTC+2

Análisis del par GBP/USD. Vista previa de la semana. Un paquete de estadísticas británicas que la libra no necesita.

El par de divisas GBP/USD continúa un sólido movimiento alcista después de una corrección de un mes. Para la corrección había fundamentos técnicos (el precio no puede moverse siempre

Paolo Greco 04:31 2025-08-11 UTC+2

Análisis del par EUR/USD. Vista previa de la semana. Al dólar le esperan nuevas pruebas.

El par de divisas EUR/USD muestra todos los signos de reanudación de la tendencia alcista, que debería llevar el nombre de Trump. La caída de la moneda estadounidense comenzó prácticamente

Paolo Greco 04:31 2025-08-11 UTC+2

WTI - West Texas Intermediate. Análisis de precios. Pronóstico. Trump amenaza a India y China con aranceles adicionales sobre la importación de petróleo ruso, lo que genera preocupaciones sobre la redirección de los suministros.

El petróleo West Texas Intermediate (WTI), que es el referente del crudo estadounidense, rebotó desde un mínimo de cinco semanas y subió por encima de los $63,50 en medio

Irina Yanina 04:25 2025-08-07 UTC+2

Análisis del par GBP/USD. El 7 de agosto. ¿Qué nos tiene preparado el Banco de Inglaterra?

El par de divisas GBP/USD el miércoles volvió a negociarse con bastante calma, pero la balanza poco a poco se inclina a favor de la libra (y también del euro)

Paolo Greco 04:25 2025-08-07 UTC+2

Análisis del par EUR/USD. El 7 de agosto. Trump inicia una nueva ronda de escalada en la guerra comercial.

El par de divisas EUR/USD durante la mayor parte del miércoles volvió a negociarse con una volatilidad muy baja. Esta semana hay realmente muy pocos eventos macroeconómicos, pero al mismo

Paolo Greco 04:25 2025-08-07 UTC+2

Análisis del par GBP/USD. El 6 de agosto. La libra espera el veredicto del Banco de Inglaterra.

El par de divisas GBP/USD se mantuvo prácticamente sin cambios durante la mayor parte del martes. En principio, no hay nada sorprendente en esto, ya que al menos

Paolo Greco 04:23 2025-08-06 UTC+2
¿No puede hablar ahora mismo?
Ingrese su pregunta en el chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.