- The EUR/USD stops a four -day streak, contributing slightly down during the American negotiation hours.
- The ECB keeps key interest rates without changes; The ease of deposit remains at 2.00% and the main refinancing operations rate at 2.15%.
- Lagarde highlighted the strength of the euro as a wind against for the export competitiveness of the Eurozone.
The euro (EUR) remains stable against the US dollar (USD) on Thursday, after the European Central Bank (ECB) maintained interest rates without changes, as expected. The ECB maintained its deposit rate in 2.00% and the main refinancing operations rate in 2.15%, while maintaining a cautious tone and dependent on the data in the midst of the persistent strength of the euro and the growing commercial uncertainty with the United States (USA). Although the decision on rates was completely valued by the markets, the euro suffered a slight pressure while the European Union hastened to end a commercial agreement with Washington before the deadline of August 1.
At the time of writing, the EUR/USD is modestly falling, breaking a four -day streak and around 1,1763 during the American negotiation hours. The recoil of the torque reflects a mixture of cautious feeling after the pause in the policy of the ECB and a stable US dollar.
In its official monetary policy statement, the ECB pointed out that inflation has returned to its goal of 2% in the medium term, and the recent economic indicators suggest a modest resilience throughout the Eurozone. However, those responsible for policies indicated the increase in external risks, more markedly, the growing commercial tensions with the US and the potential impact of a stronger euro on export competitiveness. The Central Bank emphasized a data -dependent approach, meeting by meeting, without offering any explicit guide on the moment or magnitude of future policy movements.
During her press conference in Frankfurt, the president of the ECB, Christine Lagarde, reiterated that the risks to the eurozone economy are still “inclined downward”, citing current and expected American tariffs, as well as continuous geopolitical uncertainty, such as key factors that undermine business investment and growth. On commercial tensions, Lagarde emphasized that a quick resolution could “raise feeling and stimulate the activity”, but without a clear resolution, the ECB will remain cautious.
The American dollar index (DXY), which tracks the value of the dollar against a main currency basket, is quoting around 97.40 on Thursday, while investors expect the key economic data of the US, including the preliminary purchasing managers index (PMI) and initial applications for unemployment. The nearby figures could offer new perspectives on the health of the US economy and shape the expectations around the next Federal Reserve Policy Movement.
ECB – FREQUENT QUESTIONS
The European Central Bank (ECB), based in Frankfurt (Germany), is the euro zone reserve bank. The ECB sets interest rates and manages the monetary policy of the region.
The main mandate of the ECB is to maintain prices stability, which means maintaining inflation around 2%. Its main tool to achieve this is to raise or lower interest rates. Relatively high interest rates often translate into a stronger euro, and vice versa.
The BCE Governing Council adopts monetary policy decisions in meetings that are held eight times a year. The decisions are adopted by the directors of the national banks of the euro zone and six permanent members, including the president of the ECB, Christine Lagarde.
In extreme situations, the European Central Bank can launch a political tool called Quantitative Easing (quantitative relaxation). The QE is the process by which the ECB prints euros and uses them to buy assets (normally state or business bonds) to banks and other financial institutions. The result is usually a weaker euro ..
The QE is a last resort when it is unlikely that a simple decrease in interest rates achieves the price stability objective. The ECB used it during the great financial crisis of 2009-11, in 2015 when inflation remained stubbornly low, as well as during the Coronavirus pandemic.
The quantitative hardening (QT) is the reverse of the QE. It is carried out after the QE, when economic recovery is underway and inflation begins to increase. While in the QE the European Central Bank (ECB) buys state and business bonds from financial institutions to provide liquidity, in the QT the ECB stops buying more bonds and stops reinvesting the main one that overcomes the bonds it already has. It is usually positive (or bullish) for the euro.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
