The euro surged past the 1.14 mark against the dollar following the European Central Bank’s decision on June 5, 2025, to reduce its benchmark deposit rate from 2.25% to 2.00% — marking the eighth cut within a year.
President Christine Lagarde emphasized that with inflation now hovering near the 2% target, the ECB is likely approaching the end of its aggressive easing cycle.
During the press briefing, Lagarde highlighted that monetary conditions are “well‑positioned,” suggesting a potential pause in rate adjustments in upcoming meetings. Markets, interpreting this guidance, anticipate a possible halt in cuts in July, with only one more reduction feasible by year‑end.
The euro responded positively, briefly trading near 1.1498 before stabilizing around /This rally was reinforced by dovish comments from the ECB and softer U.S. economic sentiment following lackluster jobless data, which has bolstered expectations of U.S. Federal Reserve rate cuts
Analysts describe the move as historically significant — the eighth rate reduction in just over a year, culminating in a total easing of 200 basis points since mid-2024 .
The ECB’s updated forecasts, showing inflation drifting to 1.9% in April and projecting around 1.6% by 2026, combined with a stronger euro and lower energy prices, reinforce the argument that inflation is well on its way back to target.
Savvy investors are now closely monitoring U.S. Non‑Farm Payroll data for May, predicting growth to slow from 177,000 to around 130,000 jobs. Any upside surprise may dampen the dollar-strenghtening sentiment that’s been fueling the euro rally.
