The European Central Bank (ECB) maintained its benchmark interest rates in the July meeting, as anticipated. The decision came after last month’s significant rate cut, reflecting policymakers’ uncertainty about the pace of inflation moderation in the Eurozone. Following the announcement, the euro remained steady at nearly $1.093 on Thursday, close to the four-month high reached in the previous session. 

ECB officials highlighted that domestic price pressures continue to be elevated, with services inflation expected to exceed the target well into next year. Recent data supports the concern, as the latest inflation report revealed that annual inflation slightly decreased to 2.5% in June, while core inflation held steady at 2.9%, and services inflation remained high at 4.1%. 

Despite the concerns, market expectations suggest the ECB may resume interest rate cuts in the upcoming September meeting. Meanwhile, dovish expectations for the U.S. Federal Reserve continued to provide support for the euro. 

(EURUSD Monthly Chart) 

In addition, European stocks closed lower on Thursday, reversing earlier gains and extending the sharp losses from the previous session. The decline was primarily driven by continued pressure on tech companies. The Eurozone’s Stoxx 50 index fell 0.44% to close at 4,870.12, while the pan-European Stoxx 600 ended just below the flatline at 514.01 (-0.16%). 

ASML, the largest company in the Stoxx 50, saw its shares drop by over 3%, bringing its total losses for the week to more than 16%. Investors continued to assess the potential impact of US restrictions on the chip sector, particularly concerning business with China. Other tech companies also suffered, with SAP and Nokia experiencing losses of 2% and 4%, respectively. 

The downturn in tech stocks overshadowed gains in other sectors. Notably, automobile manufacturers bucked the trend, booking gains for the day. 

(Stoxx 50 Index Monthly Chart) 

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