Where Is EUR/USD Headed After the Dovish ECB?

The ECB meeting is behind us and they left interest rates unchanged at 3.75% as expected this time, but where has that left EUR/USD? Following this week’s ECB meeting, some analysts forecasted that EUR/USD is more likely to decline toward 1.08 rather than rise to the major level of 1.10, due to a cooling Eurozone economic outlook and increasing concerns about the fiscal situation in France amid political uncertainty.

With minimal influence from the euro side, the current mix of USD-positive and USD-negative events has kept EUR/USD hovering around 1.09 ahead of the ECB meeting. The Eurozone Expectations Survey indicated a slowdown, reflecting a loss of momentum in activity sentiment over the past month. Additionally, the ZEW Survey confirmed a drop in the German expectations gauge. This combination of weaker sentiment and economic indicators suggests that EUR/USD might face downward pressure in the near term.

EUR/USD Chart – Retreating Toward 1.09 Again

ECB Interest Rate and Policy Meeting

• Main refinancing rate: Held steady at 4.25%, in line with expectations.
• Deposit facility rate: Remains at 3.75%, as anticipated.
• Marginal lending facility: Unchanged at 4.50%.

Key Points from the Meeting:

• Assessment of Inflation Outlook: Incoming information broadly supports the ECB’s previous assessment.
• Rate Path: The ECB is not pre-committing to a specific rate path.
• Inflation Target: The ECB is determined to ensure that inflation returns to the 2% target in a timely manner.
• Policy Rates: Will maintain sufficiently restrictive policy rates for as long as necessary to bring inflation back to the medium-term target.
• Domestic Price Pressures: Domestic price pressures remain high.
• Services Inflation: Services inflation is elevated.
• Headline Inflation: Likely to stay above target well into next year.

Comments in ECB President Lagarde’s Opening Statement

• • September Decision Uncertainty: The question of what actions will be taken in September remains wide open and will depend on incoming data.
  • No Pre-Determined Path: There is no predetermined path set for September’s decisions.
  • Data Consideration: September projections and additional data will be carefully considered.
  • Unanimous Decision: Today’s decision was unanimous among ECB members.

  Economic Outlook:

  • Q2 Growth: Q2 growth likely slowed compared to Q1.
  • Job Creation: Expectation of increased job creation in Q2, particularly in services sectors.
  • Resilient Labor Market: The labor market has shown resilience.
  • Recovery Supported by Consumption: Economic recovery expected to be supported by consumer spending.
  • Inflation Measures: Most inflation measures remained stable or showed slight decreases in June.
  • Wage Growth: Wages continue to rise at an elevated rate.
  • Future Wage Trends: Surveys suggest wages will moderate over the next year.
  • Inflation Expectations: Inflation expected to fluctuate around current levels for the rest of the year, influenced in part by energy price effects.
  • Target Inflation: Anticipated to decline toward the target in the second half of 2025.
  • Downside Economic Risks: Risks to economic growth are tilted to the downside.

EUR/USD Live Chart

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Skerdian Meta

Lead Analyst

Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.

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