The European Central Bank (ECB) is holding a two-day meeting and is expected to announce its monetary policy decision on Thursday. The ECB is widely expected to keep interest rates on hold for the fifth consecutive meeting, leaving key refinancing operations, marginal lending facilities and deposit limits unchanged at 2.15%, 2.4% and 2%, respectively.
Additionally, ECB President Christine Lagarde is expected to hold a press conference afterwards to explain the rationale for policymakers’ decision.
Ahead of the announcement, the EUR/USD pair had been trading above the 1.1800 mark, stabilizing after a sharp recovery from January’s peak of 1.2082.
What can we expect from the ECB’s interest rate decisions?
The ECB is in a good position and plans to stay put, refraining from further monetary policy action. The ECB was one of the first major central banks to cut interest rates in response to a post-pandemic inflation peak that pushed interest rates to their highest levels in decades. President Christine Lagarde’s recent message is that monetary policy is in a “good situation” and she is expected to repeat this message.
The board decided to keep interest rates unchanged at its December meeting, but there were no new clues about future action. As ING noted, “The minutes of the ECB’s December meeting confirm the ECB’s wait-and-see attitude in the macro environment, where the base case looks very positive but risks remain unusually high.”
Meanwhile, macroeconomic indicators released over the past few months support the authorities’ position. The euro area economy is not only resilient, it is finally showing signs of improvement.
The European Union (EU) grew 0.3% quarter-on-quarter in the three months to December, with gross domestic product (GDP) growing 1.6% year-on-year in 2025, according to the latest data from Eurostat.
Meanwhile, as expected, inflation slowed in January. Eurostat reported that the Harmonized Index of Consumer Prices (HICP) rose 1.7% in the year to January, as expected, but slowed from December’s 1.9%. Core HICP, which excludes volatile components such as food and energy, rose 2.3% as expected, matching last month’s figure.
Finally, it is worth remembering that, in the ECB’s last post-meeting speech, Lagarde made it clear that given the “good situation” in monetary policy, this did not mean a fixed or predictable path for interest rates. He also emphasized the ECB’s meeting-by-meeting approach.
In this scenario, future monetary policy decisions are likely to be nothing. The general consensus is that the ECB will maintain its hawkish stance and that President Lagarde will reiterate her message that the ECB is in wait-and-see mode and will pay attention to economic trends without setting a predetermined financial path.
What impact could the ECB Governing Council have on EUR/USD?
Following volatile price movements over the past two weeks, the EUR/USD pair was stable above 1.1800 before the announcement. The EUR/USD pair is also about 300 pips below its recent peak, but has retained most of its 2025 gains.
“Technically speaking, the bearish case for the EUR/USD pair appears to be quite limited. On the daily chart, the EUR/USD pair remains well above all moving averages,” said Valeria Bednarik, Principal Analyst at FXStreet. At the same time, the bullish 20-day simple moving average (SMA) has risen above the 100 and 200 SMAs and is providing support around 1.1760. At the same time, the technical indicators are picking up after approaching the midline. At the time of writing, the upside strength is uneven.
Bednarik said: “EUR/USD bottomed at around 1.1775 at the beginning of the week, and the 1.1760-1.1770 area is an immediate downside barrier. “The 1.1700 threshold is exposed on the way to the bulls’ mark. Bulls will look for a rally above 1.1920 to add longs and aim for a test of 1.2000,” he added. Mark. ”
The article “European Central Bank leaves interest rates unchanged as markets wait for Lagarde’s guidance” was first published on BeInCrypto.
