24.04.202609:37 Forex Analysis & Reviews: The ECB Will Raise Interest Rates in June

Yesterday, the euro declined slightly against the U.S. dollar, influenced by a range of factors, including heightened geopolitical tensions and expectations of further actions from the European Central Bank (ECB). Many market participants are discussing the possible repercussions of an escalation of conflict in the Middle East for the global economy and, consequently, for the ECB's policies.

According to several economists' forecasts, the ECB is likely to respond to the current geopolitical situation by raising interest rates. The first such increase is expected as early as June of this year. This decision will aim to combat inflationary pressures, which are likely to intensify due to disruptions in energy supplies. However, in the long term, to safeguard economic growth that could be undermined by external shocks, the ECB will likely begin lowering rates next year. This dual approach will allow the central bank to balance between controlling inflation and supporting economic activity.

At the April meeting, the ECB will almost certainly keep the deposit rate unchanged at 2%, but is expected to raise it by a quarter percentage point at the next meeting after new forecasts provide a clearer picture of the economic consequences of the conflict. Half of the economists predicting a rate increase in June also expect at least one decrease by the end of 2027. The average estimate indicates that the deposit rate will return to 2% by September of that year.

ECB Chief Economist Philip Lane and other experts have recently stated that this month, they are unlikely to have enough information to determine whether households' and companies' inflation expectations have changed significantly due to the sharp rise in oil and natural gas prices. At the same time, they emphasize that they are closely monitoring such signals and will take necessary actions.

According to the latest data, consumer prices in the eurozone rose by 2.6% year-on-year in March—the highest rate since mid-2024. Expectations regarding retail prices and concerns about inflation have also increased. However, all of this was roughly in line with economists' forecasts and did not result in significant changes in the market or the regulator's policy.

Regarding the futures market, while traders are almost entirely confident that the ECB will keep interest rates unchanged next week, they still predict two quarter-point rate increases this year.

As for the current technical picture of EUR/USD, buyers need to focus on reclaiming the 1.1690 level. Only this will allow for targeting a test of 1.1720. From there, they could reach 1.1760, but doing so without support from major players will be quite challenging. The further target will be the high of 1.1790. In the event of a decline in the trading instrument, I expect serious action from major buyers only around 1.1666. If there are no significant buyers present, it would be better to wait for a low at 1.1645 or open long positions from 1.1620.