4 min read The European Central Bank (ECB) has announced its latest interest rate decision, hiking rates by 25 basis points to take the deposit rate to 2.5%. This was in line with expectations and the second rate hike since the start of the Iran war.
The ECB left inflation forecasts unchanged for 2026, but raised forecasts for 2027 and 2028 and warned that inflation would remain above the 2% target for an extended period. GDP growth forecasts were raised for2027.
The ECB said it remains data-dependent and with no set path for rates. However, the market is interpreting the forecasts as slightly more hawkish, fully pricing in two more quarter-point hikes by March compared to April prior to the decision.
Attention will now turn to ECB President Christine Lagarde’s speech, which could preserve the central bank’s hawkish stance.
EURO VS DOLLAR (EUR/USD):
EUR/USD was trading -0.10% at 1.1620 ahead of the announcement and trades -0.25% at 1.1605 post-decision and following hotter than expected US PPI data. If we take a closer look at the technicals, EUR/USD is breaking below its 50 EMA and rising trendline support heading towards the 200 EMA at 1.1580. A break below here opens the door to 1.15.
EURO STOXX 50 (EU50):
The EURO STOXX 50 is extending losses on Thursday in a broad risk off mood. The price traded -0.1% at 6300 ahead of the decision and now trades at 6270 (also a reaction to the hotter US PPI data). The price trades in a falling channel and is testing the lower band. A break below here brings 6225, the late July low into play ahead of 6190 the July low. Any recovery would need to retake the 200 EMA at 6400.
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