FX.co ★ Euro Dips but Holds Strength Amid ECB Signals of Rate Cut End

The euro experienced a slight dip, reaching $1.142, yet maintained its proximity to the recent six-week peak of $1.149, achieved last Thursday. This movement occurred following the European Central Bank’s (ECB) much-awaited rate reduction and President Christine Lagarde’s remarks suggesting that the institution is nearing the conclusion of its monetary easing cycle. In parallel, ECB policymaker Yannis Stournaras, in conversation with Bloomberg, pointed out that the eurozone has successfully achieved a soft landing, implying that most of the rate reductions may be behind us, although uncertainties still persist, particularly in light of the possible repercussions from new tariffs. On Thursday, the ECB opted to cut interest rates by an additional 25 basis points while also lowering its inflation projections for the current and following year. It now anticipates that headline inflation will average 2.0% in 2025 and decrease to 1.6% in 2026—a 0.3 percentage point reduction from the projections made in March—attributable to factors like declining energy prices and the euro’s strengthening. The euro also found support in the broader weakening of the dollar, as investor confidence in US assets diminishes due to concerns over President Trump's tariffs and spending cuts, thereby raising apprehensions about the future of US economic growth.