Bank of America expects the June ECB meeting to deliver a widely anticipated 25bp rate cut without offering clear forward guidance. With uncertainty around tariffs and inflation, the ECB is likely to maintain a data-dependent stance, keeping the EUR broadly unaffected.
Key Points:
Rate Cut Priced In:The ECB is expected to lower its policy rate by 25bp this week—a move that is already fully priced by markets.
Guidance to Remain Cautious:While policymakers may acknowledge the possibility of further easing below 2%, BofA expects no explicit pre-commitment, due to ongoing global trade and inflation uncertainties.
Macro Backdrop Justifies Caution:Continued uncertainty around US-EU tariff policy provides the Governing Council cover to avoid strong signals about the path ahead.
Market Implications:BofA maintains a bullish bias on Euro area duration (bonds) due to expectations of a lower terminal policy rate.However, they view the ECB meeting as a non-event for the EUR, with greater focus on US economic data and European reform momentum.
Conclusion:
The ECB is likely to tread carefully at this week’s meeting, avoiding strong forward guidance amid external risks. With a rate cut already in the price, the euro should remain stable, and traders are advised to look elsewhere—particularly US data—for near-term EUR/USD drivers.
For bank trade ideas, check out eFX Plus. For a limited time, get a 7 day free trial, basic for $79 per month and premium at $109 per month. Get it here.
This article was written by Adam Button at www.forexlive.com.