EUR: No big surprises from the ECB – Commerzbank

The market is convinced that the ECB will cut its key rates by another 25 basis points today. This will lower the deposit rate to 2.00%. ECB Council members have signaled such a move too often in recent weeks – only a few super hawks such as Robert Holzmann of the Austrian National Bank have expressed reservations, Commerzbank's FX analyst Antje Praefcke notes.

ECB to lower rates one last time in September to 1.75%

"At the same time, the ECB is likely to lower its growth and inflation forecasts for 2025 slightly, which would underpin the interest rate move. These forecast changes are likely to be based on the expected growth-dampening effect of US tariffs and lower energy prices. The stronger Euro may also be mentioned, as it further reduces inflationary risks. The inflation figures for May, which were published the day before yesterday, are entirely in line with this – they provide an excellent basis for a revision of the projections and today's cut. The ECB meeting will therefore be in line with market expectations and have little impact on the Euro."

"The question is, at most, what the ECB might envisage for later in the year. Our experts assume that the ECB will cut rates one last time in September, to 1.75%. This is supported by growth concerns and inflation, which could even remain below the 2% target for a short period. In the medium term, however, the ECB is likely to assume that the trade war will tend to push up prices, meaning that inflation will pick up again if the tariffs are introduced. The ECB is therefore likely to adopt a wait-and-see approach after its last interest rate step in the fall."

"However, following the inflation figures released on Tuesday, the market currently sees a chance that the ECB could take one more step before the end of the year, bringing the deposit rate to 1.50%. Until then, however, anything is possible in these uncertain times (keyword: US tariff policy). At least a dovish surprise from the ECB is not really possible today. This also suggests that the Euro will show little reaction to the interest rate decision."