The recent minutes from the June European Central Bank (ECB) meeting have revealed a disagreement among members regarding the decision to cut rates, according to ING FX analyst Francesco Pesole. The Euro is expected to fluctuate between the 1.08/1.09 range.
Pesole suggests that the rate cut in June was more of a result of previous commitments rather than a strong intention to initiate an easing cycle. The minutes emphasize the importance of data dependency, particularly focusing on wages, which are keeping many ECB members cautious about further easing measures.
Despite this, there is a growing confidence within the Governing Council regarding the ECB’s economic projections. These projections remain optimistic about disinflation by the end of 2025, leading Pesole to believe that two more rate cuts by the ECB may be justified by the end of the year. However, market pricing is less dovish, currently at 38 basis points.
Looking ahead, Pesole forecasts that the EUR/USD may continue to trade within the 1.08/1.09 range, with the risk of French bond spreads widening after Sunday’s election acting as a potential cap on the Euro’s upside.
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