The European Central Bank (ECB) is widely expected to keep interest rates unchanged for the third consecutive meeting on Thursday, as policymakers weigh stable inflation and signs of improving economic activity across the Eurozone.
The central bank is set to maintain the main refinancing rate at 2.15%, the marginal lending facility at 2.40%, and the deposit rate at 2.00%, with the decision due at 13:15 GMT. ECB President Christine Lagarde will hold a press conference at 13:45 GMT, where markets will be watching closely for clues about the future policy path.
The decision is not accompanied by updated staff projections, but Lagarde’s tone and guidance will be key in shaping expectations for whether the ECB has ended its rate-cutting cycle.
Lagarde’s Comments Under the Spotlight
At the September policy meeting, President Lagarde emphasized that the Eurozone economy remains resilient, noting that the disinflationary process has concluded and that inflation is “where we want it to be.”
Recent data has supported that assessment. Core Eurozone inflation (HICP) ticked slightly higher to 2.4% year-on-year in September, up from 2.3% previously, remaining close to the ECB’s 2% target.
Meanwhile, the HCOB Composite PMI for October rose to 52.2, its highest level since May 2024, signaling a pickup in both manufacturing and services activity.
The Eurozone Q3 GDP reading, due just hours before the ECB decision, is expected to show 0.1% quarterly growth, matching the previous quarter’s pace and reinforcing the view of modest but steady expansion.
Policy Outlook: High Bar for Further Easing
Given the recent stabilization in inflation and improving activity data, analysts believe Lagarde and other ECB policymakers are likely to maintain a cautious but steady stance, suggesting no immediate need for further cuts.
Market expectations reflect that sentiment. According to Brown Brothers Harriman (BBH), swaps markets currently price in around 50% odds of one additional 25-basis-point rate cut over the next year, with rates expected to bottom near 1.75%.
Economists at TD Securities (TDS) said in a preview note:
“While growth is slowing into year-end, there’s no need for President Lagarde to change her tone from September’s meeting. The ECB remains comfortable with its current stance but stands ready to act should downside risks emerge.”
EUR/USD Outlook: Volatility Expected
The EUR/USD pair remains capped below the 1.1650 level ahead of the ECB announcement, weighed down by renewed US Dollar strength and ongoing French political uncertainty.
Bloomberg reported that French lawmakers postponed a vote on a Socialist wealth tax proposal, delaying progress on a contentious budget debate that could threaten the fragile government of Prime Minister Sébastien Lecornu—a factor that continues to weigh on the Euro.
Market reaction will hinge on Lagarde’s tone:
- If she reiterates that the ECB is “in a good place” and signals confidence that the rate-cutting cycle has ended, EUR/USD could rebound.
- Conversely, if she highlights concerns about growth and keeps the door open for further easing, the Euro could face renewed selling pressure.
Technical Outlook: Downside Risks Persist
According to Dhwani Mehta, Asian Session Lead Analyst at FXStreet, the short-term technical setup for EUR/USD remains bearish:
“EUR/USD closed below the 21-day Simple Moving Average (SMA) at 1.1638, with the 14-day RSI holding below 50, confirming downside momentum.”
She adds:
- A sustained break below 1.1575 could trigger a deeper drop toward 1.1542 (October low) and possibly 1.1500.
- On the upside, reclaiming the 21-day SMA would bring resistance near 1.1670, followed by 1.1728 (October 17 high) and 1.1800.
Euro Performance Snapshot – Last 7 Days
| Base / Quote | USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF |
|---|---|---|---|---|---|---|---|---|
| USD | — | -0.04% | 1.12% | 0.69% | -0.40% | -1.53% | -0.65% | 0.44% |
| EUR | 0.04% | — | 1.20% | 0.71% | -0.36% | -1.48% | -0.59% | 0.44% |
| GBP | -1.12% | -1.20% | — | -0.53% | -1.55% | -2.66% | -1.83% | -0.80% |
| JPY | -0.69% | -0.71% | 0.53% | — | -1.05% | -2.18% | -1.32% | -0.28% |
| CAD | 0.40% | 0.36% | 1.55% | 1.05% | — | -1.12% | -0.27% | 0.80% |
| AUD | 1.53% | 1.48% | 2.66% | 2.18% | 1.12% | — | 0.89% | 1.95% |
| NZD | 0.65% | 0.59% | 1.83% | 1.32% | 0.27% | -0.89% | — | 1.05% |
| CHF | -0.44% | -0.44% | 0.80% | 0.28% | -0.80% | -1.95% | -1.05% | — |
The Euro has shown mixed performance this week, strengthening most against the British Pound, while losing ground versus the Australian Dollar and Swiss Franc.
