Euro Steady at $1.16, ECB to Pause Rate Cuts
The euro held steady just above the $1.16 mark as investors awaited the European Central Bank’s policy decision and kept a close eye on EU-US trade developments. The EURUSD pair has edged up 0.2% early Monday to hover near $1.1650.
The euro has appreciated against the U.S. dollar by around 15% since the start of the year despite the tariff threat against the EU. A stronger euro damps inflation in the Eurozone directly by lowering the prices of imported goods and services.
But a stronger currency also compounds the impact of higher tariffs on U.S. demand for goods made in Europe, slowing Eurozone growth and cooling inflation.
For the first time in one year, the European Central Bank (ECB) is expected to meet to deliberate on rates for eight consecutive cuts on Thursday—as the Eurozone’s annual rate of inflation was at the ECB’s target in June 2025.
The central bank is expected to leave interest rates unchanged, with policymakers adopting a wait-and-see approach amid uncertainty over the impact of steeper-than-expected US tariffs and a stronger euro on European growth and inflation.
EU envoys are preparing to meet as early as this week to discuss contingency measures in case of a no-deal outcome with US President Donald Trump, whose tariff stance appears to have hardened ahead of the August 1 deadline.
The stronger euro and the renewed tariff threats are clearly increasing disinflationary pressures for the Eurozone, risking inflation undershooting and increasing the likelihood of more ECB rate cuts,” said Carsten Brzeski, an economist at ING Bank. #Euro Steady at $1.16, ECB to Pause Rate Cuts US Dollar Falls Ahead of Fed Chair Jerome Powell Speech
