Euro parks at two-month high after hints at ECB June rate cuts

Euro gained ground in European trade on Friday against a basket of major rivals, extending gains for the sixth straight session against the dollar and scaling a two-month high as the ECB hinted strongly at a June rate cut.

Markets were expecting an April ECB cut but ECB policymakers asserted the need to see more evidence of the slowing inflation before taking a decision to ease policies.

EUR/USD

EUR/USD rose 0.1% to 1.0956, the highest since January 15, with a session-low at 1.0942. 

The pair rose 0.5% on Thursday, the fifth profit in a row after the European Central Bank’s policy meeting this week. 

Weekly Trades

Euro is up 1.1% so far this week on track for the third weekly profit in a row, and the largest since December 2023.

The ECB

As expected, the European Central Bank held interest rates unchanged at 4.5%, the highest in 23 years.

The ECB said that current interest rates will contribute to bringing inflation to the 2% target if maintained long enough. 

The ECB added that main inflation indices slowed down remarkably, but local prices remain high.

The ECB expects inflation to average 2.3% in 2024, and 2.0% in 2025, and 1.9% in 2026. 

Lagarde 

ECB President Christine Lagarde said at the post-meeting press conference on Thursday, that there’s a marked slowdown in consumer prices, but it’s still not enough to start policy easing. 

She hinted at a potential rate cut in June as new estimates pin inflation at 2% in 2025. 

 She asserted the need for more evidence and data in the next few months before deciding on policy easing.