empty
17.07.2024 12:36 PM
EUR/USD. ECB July meeting: preview

Tomorrow, July 18, the European Central Bank will hold its next – July – meeting. It cannot be said that the July meeting is merely routine, although the formal outcomes of this event are indeed predetermined. The regulator is likely to keep all monetary policy parameters unchanged: the probability of this scenario is close to 100%.

Nevertheless, the July meeting will likely provoke significant volatility for the EUR/USD pair, as it will determine the prospects for monetary policy easing. Essentially, the intrigue of the July meeting boils down to one question: will the ECB lower interest rates in September or adopt a wait-and-see approach? Previous signals have been ambiguous, so the intrigue of the July meeting remains.

This image is no longer relevant

According to general market expectations, by the end of the year, the European Central Bank may make two more rate cuts, totaling 25 basis points. However, data on inflation growth in the Eurozone, published in early July, paints a contradictory picture.

For example, the CPI growth report for June reflected a slight slowdown in the overall consumer price index (2.5%) and stagnation in the core index (2.9%). The core CPI showed a downward trend for 9 months (from August 2023 to April 2024 inclusive), reaching 2.7%. However, in May it accelerated to 2.9% and remained at this level in June. Another inflation indicator – the Eurozone producer price index – came in at -0.2% month-on-month (against a forecast of -0.1%) and -4.2% year-on-year (against a forecast of -4.1%).

Commenting on these releases, ECB President Christine Lagarde stated that the Central Bank has made progress in disinflation, as key inflation indicators are "moving in the right direction." She indicated that the regulator will not lower rates in July but did not rule out further steps towards easing monetary policy at subsequent meetings. Her main message was that the June rate cut did not signify the start of a sequential cycle: corresponding decisions will be made from meeting to meeting. For example, ahead of the July meeting, fundamental conditions for an additional step towards easing have clearly not formed. Whether they will form by September is an open question. Everything will depend on the dynamics of key macroeconomic indicators, primarily in the area of inflation.

It can be assumed that this message will be incorporated into the accompanying statement. Similar theses are likely to be voiced by Christine Lagarde at the final press conference. The European Central Bank will certainly not want to commit to specific deadlines and volumes for rate cuts.

At the same time, the lack of clear "announcing" signals will be compensated by declarative signals. That is, the markets will once again be assured that the path to policy easing is a priority. However, the Central Bank will note that this path is winding, bumpy, and dependent on many factors, so there can be no talk of a "roadmap."

Here we can also recall the minutes of the June ECB meeting, which reflected the concern of the Council members about inflationary prospects. In particular, the members of the regulator noted that wage growth turned out to be unexpectedly high, as did the inflation rate in the services sector. Inflation, according to the Central Bank, turned out to be more resilient, and the risks to the inflation forecast "are skewed to the upside."

At the same time, ECB members agreed with the proposal of Chief Economist Philip Lane to cut interest rates by 25 points.

As we can see, despite the final unanimous decision, many members of the regulator expressed their concern about inflation. The June CPI growth report, published in July (i.e., after this meeting), should further heighten this concern.

All this suggests that the results of the July ECB meeting will likely be interpreted in favor of the single currency, as the regulator will demonstrate hesitation regarding further steps towards monetary policy easing. The word "if" will become key in the final communique, considering the Central Bank's declared dependence on incoming data.

Any doubts from the European Central Bank will play into the hands of EUR/USD buyers. Especially since the chances of a Fed rate cut at the September meeting are, on the contrary, growing – "by leaps and bounds." According to the CME FedWatch tool, the probability of a 25-point rate cut in September is 93%. Traders also see a 7% chance of a 50-point cut. At the same time, the probability of maintaining the status quo has dropped to zero.

Thus, ambiguous data on inflation growth in the Eurozone, ambiguous minutes of the June meeting, and cautious comments from Christine Lagarde signal that the ECB will not take a "dovish" stance, thereby supporting the euro. The dollar, meanwhile, remains under pressure, so positive (for the euro) outcomes of the July meeting will allow EUR/USD buyers to test the nearest resistance level at 1.0960 (the upper line of the Bollinger Bands indicator on the daily chart) and possibly approach the boundaries of the 10th figure.

Irina Manzenko,
Analytical expert of InstaForex
© 2007-2025
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

The Pound Ignores Weak Data and Persistently Tries to Continue Rising

The macroeconomic data from the UK published last week looks frankly weak—everything is in the red zone, meaning worse than expected. Nevertheless, the pound continues to climb upward regardless

Kuvat Raharjo 19:36 2025-06-16 UTC+2

CFTC Report: The Dollar Is Being Sold Off Again. Awaiting New Revelations from Trump

Five weeks ago, the total short position on the U.S. dollar against major currencies stopped increasing, which gave reason to believe the dollar might begin an offensive in the currency

Kuvat Raharjo 12:14 2025-06-16 UTC+2

GBP/USD. Analysis and Forecast

Today, the GBP/USD pair is attempting to regain positive momentum while remaining on the defensive. Traders prefer to wait for the release of key data before opening directional positions

Irina Yanina 12:10 2025-06-16 UTC+2

EUR/USD. Analysis and Forecast

Today, the EUR/USD pair is attempting to regain positive momentum, approaching the psychological level of 1.600 and price levels last seen in 2021. Traders are eagerly awaiting the important political

Irina Yanina 12:08 2025-06-16 UTC+2

The Israel-Iran Confrontation. Fed Meeting. What's Next? (I expect further decline in USD/CAD and a local pullback in gold before a new wave of growth)

Israel and Iran are exchanging missile strikes, but it seems markets are trying to play their own game, assuming that this conflict will not cross the nuclear threshold

Pati Gani 10:51 2025-06-16 UTC+2

EUR/USD: War Is No Ally to the Greenback

At the start of the new trading week, the EUR/USD pair stayed within the 1.15 range and is even trying to approach the resistance level of 1.1600 despite the ongoing

Irina Manzenko 10:32 2025-06-16 UTC+2

What to Pay Attention to on June 16? A Breakdown of Fundamental Events for Beginners

No macroeconomic reports are scheduled for Monday, but the market does not lack news. This week, Donald Trump announced his intention to raise all import tariffs, as none

Paolo Greco 06:46 2025-06-16 UTC+2

GBP/USD Overview – June 16: How Trump Is Undermining the Dollar

The GBP/USD currency pair will remain under the influence of geopolitics and politics in the new week. Essentially, we've been saying the same thing every day for the past four

Paolo Greco 04:54 2025-06-16 UTC+2

EUR/USD Overview – June 16: The Israel-Iran Conflict Changes Nothing

The EUR/USD currency pair moved sharply back and forth throughout Friday. The pair traded with high volatility for two consecutive days, and there is a clear and logical explanation

Paolo Greco 04:54 2025-06-16 UTC+2

EUR/USD. Weekly Preview. Focus on the Middle East and the Federal Reserve

The final trading day of last week ended on an uncertain note. Reacting to Middle East developments, the EUR/USD pair sharply declined on Friday, retreating from the multi-year price high

Irina Manzenko 01:30 2025-06-16 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.