The break below the low from the end of May at 1.0635 opens the door to a test of the bottom of the current year-to-date trading range between 1.0500 and 1.1000.

The dovish market reaction to the ECB’s policy update highlights that market participants have placed more importance on both: i) the stronger signal that rates may have peaked and are now more likely to remain on hold for a long period, and ii) the much weaker growth outlook for the euro-zone and lower inflation projections for 2025.