ECB Outlook – Strategic FX Insight | Euro Forecast
Lamera Capital
2025-07-16
ECB Outlook – Strategic FX Insight | Euro Forecast & EUR/USD Implications
The European Central Bank (ECB) has entered a cautious holding pattern in its monetary policy cycle. After delivering eight interest rate cuts over the past year, the ECB is widely expected to pause at its 24 July 2025 meeting, keeping the deposit rate steady at 2.00%.
President Christine Lagarde maintains a data-dependent, meeting-by-meeting approach, as the ECB navigates a complex environment of weak eurozone growth, sticky inflation dynamics, and global trade uncertainty.
ECB Macroeconomic Forecasts (June 2025)
- Headline Inflation: 2.0% (2025) → 1.6% (2026) → 2.0% (2027)
- Core Inflation: 2.4% (2025) → 1.9% (2026 & 2027)
- Real GDP Growth: 0.9% (2025) → 1.1% (2026) → 1.3% (2027)
While inflation is trending toward the ECB’s 2% target, economic growth remains subdued, and the eurozone recovery continues to lag behind the U.S. This divergence reinforces the ECB’s cautious stance, especially as the euro’s relative strength risks undermining exports and imported price pressures.
External Risks Weigh on Policy Outlook
- Proposed 30% U.S. tariffs on EU imports present a major geopolitical headwind
- Business sentiment is softening amid global uncertainty
- ECB remains reluctant to cut further unless eurozone data deteriorates meaningfully
From an FX strategy perspective, the ECB’s current stance limits upside potential for the euro, unless supported by stronger Eurozone data.