ECB to hold rates and Lagarde will avoid talking down Euro value

Matthew Ryan, CFA Ebury

We contest that the move above the 1.20 level in EUR/USD last week was perhaps a little stretched, particularly following Scott Bessent’s remarks that suggested that the White House still favours a stronger dollar policy.

Yet, last week’s upbeat Euro Area GDP figures (+0.3% quarter-on-quarter growth) solidify our view that the common currency is well placed to perform well in 2026, particularly as we are yet to see the full effect from Germany’s stimulus package.

The ECB is universally expected to keep rates unchanged on Thursday, with President Lagarde almost certain to reiterate that policy remains in a “good place”, effectively indicating almost no appetite for further cuts for the foreseeable future.

Her remarks on the recent rally in the euro will be watched closely by market participants, but we do not expect her to make any attempt to talk down the value of the common currency at this stage.

Author

Matthew Ryan, CFA

Ebury

Matthew is Global Head of Market Strategy at FX specialist Ebury, where he has been part of the strategy team since 2014. He provides fundamental FX analysis for a wide range of G10 and emerging market currencies.

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