Yesterday, many were watching how the European Central Bank would act under current conditions, as the economy still requires stimulus, but inflationary risks prevent further easing.

Following the meeting, President Christine Lagarde stated that the ECB has taken a wait-and-see approach, leaving interest rates unchanged for the first time in over a year amid uncertainty in trade relations with the United States. This decision reflects the ECB's delicate balance between the need to support economic growth in the eurozone and concerns about the potential impact of trade wars on European economies. Previous measures, such as rate cuts, have had only a limited effect on inflation, which remains around the ECB's target level.

Uncertainty in trade relations between the U.S. and Europe, as well as with other countries, poses significant risks to the European economy. Potential tariffs and trade barriers could negatively affect exports, investment, and overall economic growth. In this context, the ECB prefers to wait and assess the consequences of trade policies before taking further action. However, this wait-and-see position does not imply inaction. The ECB continues to closely monitor economic indicators and is prepared to act should the situation deteriorate. Lagarde emphasized that the ECB retains all tools in its arsenal and is ready to use them to maintain price stability and support economic growth in the eurozone.

It should be noted that yesterday the deposit rate was kept at 2%, as predicted by the vast majority of analysts. The ECB, still lacking clarity on the final level of tariffs, did not provide any guidance on its next steps. With inflation at 2%, "we are in a good position to wait and see," Lagarde told reporters in Frankfurt. "We are now in a good position to wait and see how these risks evolve over the coming months."

Investors are now questioning whether officials will proceed with further cuts after eight interest rate reductions since June 2024, or whether the easing cycle has come to an end. The ECB's statement noted that, despite the resilience of the economy, the overall outlook remains highly uncertain, especially due to trade disputes. Other concerns include the strong euro and a sharp increase in government spending on infrastructure and defense.

Traders have reduced expectations for another 25-basis-point cut this year, now assigning a 70% probability compared to 90% previously. Economists surveyed before the decision forecast one final quarter-point move in this cycle, likely in September. Although Lagarde stated that the economy of the 20 eurozone countries is growing broadly in line with or slightly above expectations, she reiterated that risks remain tilted to the downside. "High actual and expected tariffs, euro appreciation, and ongoing geopolitical uncertainty are making companies less willing to invest," she said. "If trade and geopolitical tensions were to ease quickly, this could boost sentiment and stimulate activity."

As for the current EUR/USD technical outlook, buyers now need to break through the 1.1760 level. Only then will it be possible to aim for a test of 1.1790. From there, a move toward 1.1825 may follow, but doing so without support from large market participants will be quite challenging. The furthest upside target remains the 1.1860 high. In case of a decline, I expect more serious buyer activity around the 1.1735 level. If that level sees no support, it may be wise to wait for a retest of the 1.1710 low or consider long positions from 1.1680.

Regarding the current GBP/USD technical outlook, pound buyers need to clear the nearest resistance at 1.3515. Only then will a move toward 1.3540 be possible, though breaking above this level will likely be difficult. The furthest upward target is the 1.3580 zone. If the pair falls, bears will attempt to take control at 1.3470. If they succeed, a breakout of this range would deal a serious blow to the bulls and push GBP/USD down to 1.3435, with the potential to reach 1.3400.