ECB REVIEW: ECB heads into summer break "well-positioned"

As expected, the ECB stood pat on rates, keeping the deposit rate at 2%. The accompanying policy statement carried little of interest, noting that incoming information is broadly in line with the Governing Council’s previous assessment of the inflation outlook. Additionally, the statement repeated the Bank's meeting-by-meeting and data-dependent approach. At the follow-up press conference, when questioned about the recent EUR appreciation and VP de Guindos' recent remark about the complications that EUR/USD breaching 1.20 would bring, President Lagarde stated that the ECB does not target FX levels but is monitoring the situation. Thereafter, Bunds were sent lower after Lagarde stated that the ECB's baseline scenario from June still holds despite US President Trump since threatening the EU with a 30% tariff rate. This statement, allied with Lagarde reiterating that policy remains in a good place, is suggestive that policymakers are not in a rush to adjust policy. This point was also underscored by the President emphasising that the ECB will not be swayed by a temporary undershoot in inflation (current 2026 forecast sees inflation at 1.6%), adding that inflation is still expected to stabilise at target over the medium term. Note, today's decision was unanimous. Overall, the main message from today was that the ECB sees itself as well-positioned to deal with short-term turbulence from the trade war and geopolitics. That being said, markets continue to price around 17bps of loosening seen by year-end (vs. 21bps pre-announcement). 

24 Jul 2025 - 15:01- ForexGeopolitical- Source: Newsquawk