European Central Bank President Christine Lagarde said that due to the trade uncertainty in the United States, the European Central Bank has kept interest rates unchanged for the first time in over a year and is currently in a “wait-and-see” mode.
On Thursday, the deposit rate was held at 2% – in line with the expectations of the vast majority of analysts surveyed by Bloomberg. With the final tariff level still unclear, the European Central Bank offered no guidance on future moves.
Given that the inflation rate has reached 2%, Lagarde told reporters in Frankfurt: “We are currently in a favorable position to wait and see. We are now in a favorable position to hold interest rates and observe how these risks develop in the coming months.”
Investors are pondering whether officials will cut interest rates further on top of the eight reductions since June 2024 or if the easing cycle has come to an end. The ECB’s statement noted that while the economy has shown resilience, the environment remains “extremely uncertain, especially in light of the impact of trade disputes”. Other challenges include a stronger euro and a significant increase in public spending on infrastructure and defense.
Traders have pared back their bets on a final quarter-point move this year to a 70% probability, down from around 90% previously. Economists surveyed before the Fed’s decision had predicted that the final quarter-point move in this cycle would come in September.
The bond market continued its earlier decline, with the yield on Germany’s 10-year government bonds rising by about 3 basis points to 2.67%. Subsequently, the yield briefly climbed to 2.70%, hitting a one-week high, after US Treasury yields fell on stronger-than-expected US employment data.
The euro rose to intraday highs against the pound and the yen. The euro was little changed against the broadly stronger dollar at $1.1770.
Lagarde said that the economic growth of the 20 countries in the eurozone was basically in line with or slightly better than expected, but she reiterated that risks still leaned towards the downside.
She said: “Actual and expected tariff hikes, a stronger euro and ongoing geopolitical uncertainties are making businesses more hesitant to invest. If trade and geopolitical tensions are resolved quickly, this could boost market sentiment and stimulate economic activity.”
Technical analysis:
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Gold: Yesterday’s buy limit in the green area of the plugin was truly classic. After the price broke in, it rebounded to the limit and rose back to 3377, achieving a profit-to-loss ratio of 1.5. For today, we suggest paying attention to the momentum signal in the blue rebound area; meanwhile, be cautious of the liquidity sweep caused by the inertia of the decline near 3340 on Friday. For detailed positions, please consult the plugin.
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Nasdaq: We continue to focus on buying after a low-sweep liquidity event. We are reluctant to buy directly at high levels. We think the dense area of liquidity sweeps within the day might occur around 23100 – 23150. Please keep an eye on it. For detailed positions, please consult the plugin.
(NASDAQ 15-minute chart)
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Crude oil: The operation of the blue momentum break yesterday was once again perfect, with a total of three opportunities. Today, we continue to pay attention to the momentum break signal above. If there is one, we still need to try it. We cannot be afraid of false breaks. At the same time, we keep an eye on the demand zone of 66.55/20. For detailed positions, please consult the plugin.
(Crude oil 15-minute chart)
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Today’s key economic data and events to focus on:
14:00 UK June seasonally adjusted retail sales
16:30 Germany July IFO Business Climate Index
20:30 US June Durable Goods Orders (initial)
