ECB set to deliver hawkish cut tomorrow.
Tomorrow the ECB is likely to deliver a 25-bps cut. The cut is expected, with markets having priced in the cut from 4% to 3.75% for a few weeks now. However, forward guidance will be key here, with market participants focusing on any clues provided regarding future policy direction.
Many regard, however, this to be a "hawkish cut" and that further rates cuts should not be expected in the shorter-term. Markets are only pricing in a 10% chance for a second cut in July, with the next probably coming in October. A third cut is currently hanging in the balance.
Questions during the press conference are likely to be met with references to data dependency and taking a meeting-by meeting approach. This is because last month's CPI picked up from 2.4% to 2.6%.
Interestingly, the EURUSD has continued to drift sideways with the spread between the German 2-year note and US 2-year note remaining benign, despite the fact tat the ECB is likely to cut. This seems to support the notion that this is to a hawkish cut in nature.
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.
Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this website are provided on an "as-is" basis, as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is therefore not subject to any prohibition on dealing ahead of dissemination. Although this commentary is not produced by an independent source, FXCM takes all sufficient steps to eliminate or prevent any conflicts of interests arising out of the production and dissemination of this communication. The employees of FXCM commit to acting in the clients' best interests and represent their views without misleading, deceiving, or otherwise impairing the clients' ability to make informed investment decisions. For more information about the FXCM's internal organizational and administrative arrangements for the prevention of conflicts, please refer to the Firms' Managing Conflicts Policy. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed here.