Synopsis:

MUFG sees limited impact on EUR/USD from today’s ECB rate cut, as the central bank maintained its meeting-by-meeting approach while signaling a more measured stance on future cuts. With uncertainty dominating the ECB’s outlook, near-term direction for EUR/USD remains unclear. MUFG remains cautious about turning outright bearish on the USD, with focus now shifting to US jobs data.

Key Points:

1️⃣ ECB Cuts 25bps, Takes Deposit Rate to 2.50% 📉

• The move was widely expected, and forward guidance remained unchanged.
• ECB described its stance as “more meaningfully less restrictive,” hinting at a cautious easing path.

2️⃣ Lagarde Highlights High Uncertainty 🌍

• The ECB avoided giving strong forward guidance due to economic uncertainty.
• This limits immediate market impact on EUR/USD.

3️⃣ Higher European Yields Providing EUR/USD Support 📊

• The recent surge in European bond yields helps stabilize the euro.
• With no clear ECB direction, focus shifts to external drivers.

4️⃣ Cautious on USD Bearishness Ahead of US Jobs Data 💵

• MUFG is wary of turning fully bearish on the dollar.
• Uncertainty over the global economy and the US growth trajectory keeps USD outlook fluid.

Conclusion:

MUFG sees today’s ECB meeting as largely neutral for EUR/USD, with European yields providing some support. The focus now moves to US jobs data, and while the USD has weakened recently, MUFG remains cautious about a sustained bearish trend given lingering global and US economic uncertainties.