EUR/USD is holding on to most of its post-ECB meeting gains. The ECB left the policy rate steady at 2.00% for a third consecutive meeting (widely expected) and signaled the easing cycle is over. The decision to stand pat was unanimous, BBH FX analysts report.

ECB signals end of easing cycle

"ECB President Christine Lagarde stressed again that monetary policy settings remain in a 'good place' and that the risks to the economic outlook are now balanced rather than to the downside. Indeed, the ECB upgraded its 2025 real GDP growth outlook."

"The ECB also implied greater confidence that inflation is stabilizing around its 2% target. Headline inflation forecasts were tweaked a tick higher for 2025 and 2026. Lagarde downplayed the downgrade to the 2027 inflation forecast from 2.0% to 1.9%, emphasizing instead that the disinflationary process is over."

"The swaps market trimmed the probability that the ECB will deliver a 25bps cut in the next 12 months from 75% to 40%. In contrast, futures fully price-in 125bps of Fed funds rate cut over the next 12 months. Bottom line: relative ECB/Fed policy stance underpins the uptrend in EUR/USD."