EUR Outlook: Dovish ECB Stance May Limit Euro Upside, Says ING

Euro Under Pressure Ahead of Dovish ECB Rate Cut – ING

ECB Expected to Cut Rates by 25bps

The European Central Bank (ECB) is expected to deliver a 25 basis point rate cut today, lowering the deposit rate to 2.00%. According to ING, markets are already pricing in another 25bp cut by the 30 October meeting, though there’s growing speculation this could be pulled forward to the 11 September meeting.

ECB Watch: Stay updated with our Central Bank Decisions Calendar.

ING: Dovish Outlook Could Cap Euro Upside

ING analysts caution that today's meeting could bring substantial downward revisions to inflation forecasts, implying that rates may need to move below neutral. The 1-month EUR ESTR rate one year forward currently sits at 1.60%, but it could drop to 1.50% or lower if volatility increases.

This dovish signal would likely prevent EUR/USD from making a meaningful rally, especially as commodity-linked G10 currencies have outperformed the Euro in the current soft USD environment.

EUR/USD Technical Outlook

ING sees a possible pullback to the 1.1330–1.1360 zone, which may act as support. Traders could look for buying interest in that area ahead of the US Nonfarm Payrolls (NFP) release, which may further weaken the USD.

See Also: EUR/USD Live Chart and Analysis.

Key Takeaways

• ECB expected to cut by 25bps; additional cuts likely by October
• EUR/USD faces resistance, especially if ECB turns more dovish
• Inflation downgrades and rate projections are critical for forward guidance
• Watch NFP data tomorrow for next directional cue in EUR/USD