Frank Walbaum

The Euro held firm on Thursday, trading near multi-year highs as investors looked ahead to the European Central Bank’s decision later in the day. Traders remain attentive to the tone of the central bank governor and its impact on the market.

Expectations that the ECB would hold its interest rates unchanged could also support yields and the euro. In this regard, ECB officials signaled a more cautious stance. Isabel Schnabel emphasized that the bar for additional rate cuts remains “very high”, warning about potential inflationary effects from tariffs.

Sovereign yields across the euro area moved higher as risk appetite improved after the US sealed a deal with Japan. However, risks could remain around the negotiations between the EU and the US.

However, the declining GfK data and softer-than-expected German PMI data could weigh on sentiment. The GfK report showed a drop in consumer confidence. Rising savings rates and lower spending intentions reflect growing household caution amid global trade tensions. This could endanger economic growth and could lead to a more dovish ECB stance.

Walbaum is Market Analyst at Naga