EUR/USD: Breach of the end of May low at 1.0635 opens the door to a test of 1.0500 – MUFG

The Euro has continued to weaken after Thursday’s ECB policy meeting. Economists at MUFG Bank analyze the shared currency outlook.

Dovish ECB update weighs on EUR

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.