ECB hikes by 25 bps, focusing on fighting inflation
Source: www.tradingview.com
The ECB has lifted its main refinancing rate and deposit rate by 25bps to 4% and 3.5% respectively. This was in line with market expectations. The central bank is in on shaky ground given that the region is in technical recession. However, the ECB is firmly focusing on its fight against inflation. EU core inflation has shown signs of moderation lately (green arrow), but its rate of change (ROC) is still too high – it is on the acceleration side of zero (red rectangle). To reach target, it is imperative that the ROC drops below zero.
Given this hike and the Fed's pause yesterday, the spread between the German 2-year bund and US 2-year note has widened. This has filtered through to the forex market and lifted EURUSD on the day to trade near 1.0890.
Russell Shor
Senior Market Strategist
Russell Shor is a Senior Market Strategist at FXCM, having been promoted to the role in 2025 in recognition of his depth of insight and consistent delivery of high-impact market analysis. He originally joined FXCM in October 2017 as a Senior Market Specialist.
Russell holds an Honours Degree in Economics from the University of South Africa, is a certified FMVA®, and a full member of the Society of Technical Analysts (UK). With over 20 years of experience in financial markets, his work is renowned for its clarity, precision, and strategic value across asset classes.
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