The euro slipped below $1.139 on Thursday after the European Central Bank left its key interest rates unchanged at its July meeting, as widely anticipated. Officials maintained a cautious, data-dependent stance, emphasizing a wait-and-see approach amid elevated uncertainty, especially around energy prices.
Following its first rate hike in three years in June, the ECB reaffirmed that future policy decisions will be guided by incoming economic data. Since then, softer inflation, weaker wage growth, slower economic activity, and lower inflation expectations have all reduced the pressure for additional tightening.
Even so, the recent jump in oil prices, driven by escalating tensions in the Middle East, has revived concerns that higher energy costs could feed through to inflation and postpone the start of policy easing. Despite these risks, money markets are still pricing in at least two ECB rate cuts by year-end, with the next move fully expected in September.
