The European Central Bank (ECB) is expected to leave rates unchanged in its July meeting, after slashing borrowing costs in June. Investors eye ECB President Christine Lagarde's signals about a potential September rate cut.
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ECB set to rock EUR/USD and beyond after "hawkish cut"
The ECB's Governing Council is comprised of representatives from 20 countries, some who prefer cutting interest rates and other to keep them up to fight inflation. That is what led to a compromise in June – a rate cut accompanied with a message not to follow up with another move in July.
Since then, inflation remained calm, supporting more cuts, but growth picked up, allowing the ECB to hold rates unchanged. That is fully priced in.
What about the next meeting? That is in September, when the Federal Reserve is set to kick off a loosening cycle with the first move. While ECB President Christine Lagarde rejects calls that her institution follows the Fed, markets assume that she will oversee a rate cut.
In the July meeting, markets will try to sniff the mood in the Governing Council, following the clues. EUR/USD is set to shake and so are other Euro pairs. There may also be some impact on Gold. The precious metal may defy gravity if the ECB is more open to cutting rates. Gold would fall on a more hawkish tone.
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(This story was corrected on June 6 at 07:45 GMT to say that the European Central Bank is set to cut interest rates for the first time since 2019, not 2020.)
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