EUR/USD is posting a strong rebound, which began earlier today ahead of the ECB decision, and is now up more than 0.8% to above 1.155 following the announcement. The pair is supported by falling oil prices, with crude retreating from around $111 per barrel to $104, as well as a weaker U.S. dollar, with the USD index (USDIDX) down over 0.8%. The ECB left rates unchanged but emphasized that it will closely monitor inflation risks in the euro area. The central bank did not commit to any specific policy path, and both the statement and Christine Lagarde’s remarks were broadly neutral.
Despite the lack of a clear policy signal, the sharp decline in oil prices appears to be driven by hopes for de-escalation in the Middle East. Following mutual attacks on energy infrastructure, markets may be pricing in a scenario where regional players seek to halt further escalation. Lower oil prices are being interpreted as a factor that could weaken the dollar and reduce inflows into U.S. Treasuries. However, even if oil ultimately returns to pre-war levels, it remains likely that the Fed will hold off on rate cuts at least until late summer or early autumn 2026.

Source: xStation5
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