BofA: This week's ECB meeting likely a non-event for the euro

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.

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