Lagarde Stays Cautiooos After Ecb Rate Cut, EUR/USD Faces Pressure from Trade Risks

The ECB ALSO DOWNGRADED ITS 2026 Inflation Outlook, City Weaker Near-Term Economic Prospects and Persent Global Trade Risks. Services Inflation, Previoously Stubborn, Has Cooled Significantly. Still, Lagarde Pointed to Bolstering Factors Such as Increated Eu Defense and Infrastructure Spending that Could Support Medium-Term Growth.

US Trade Policy Poses Risk to Europe Growth Concerns Over US Trade Tariffs Weighed Heavily on the ECB’s Forward Assessment. Trump’s Renewed Protection Stance i Expert to Hit Euro Area Exports and Dampen Business Investment. While Manufacting Has Seen Short-Term Gains from Stockpiling, Service Activity Is Slowing. Lagarde Acknowledged TheSe Risks, Adding that A Further Escalation of Trade Tensions Could Lead to Growth and Inflation Undershooting Projects.

The Stronger Euro and Deckling Energy PRICES ALSO REINFORCE Disinflationary Pressures, Reinforcing Expectations that ECB’s EASING CYCLE MAY SLOW. Some Economists Warn that Inflation Could Drop Below The Target Next Year, Reviving Memories of the Pre-Pandemic Era of Persent of Undershooting.

Market Reaction and Investor Positioning Market Participants Are now Pricing in a High Likelihood of A Rate Pause in July. Analysts from Goldman Sachs and Schroders Expert Limited Further Cuts, with DiverGence in Views on Wheri One or Two More reductions are feasible this year. The ecb’s cautious stance have been welcomed by Bond Markets, with Traders Turning Their Attraction to Fiscal Developments and Geopolitic Risks.

Outlook: EUR/USD Neutral with Downside Risk