The ECB kept rates unchanged with ECBs Lagarde saying that “the disinflationary process is over,” which suggests that she thinks inflation downward pressure has eased more than many expected.
Following Lagarde’s speech, traders have scaled back expectations for near-term ECB rate cuts. The probability of another cut by mid-2026 is now seen at around 50%, down from higher levels before today.
The ECB’s deposit facility rate will remain at 2.00% for now, and markets appear convinced there won’t be much easing until there is clearer evidence that inflation is falling sustainably.
Inflation projections through 2026–27 are broadly in line with earlier forecasts, still somewhat above target in some core measures. That backdrop supports the ECB’s “data-dependent, meeting-by-meeting” approach and makes it less likely that markets can count on guaranteed cuts anytime soon.
Despite the less dovish/more hawkish view, the major European indices did move higher. The German DAX was the laggard while Italy's FTSE MIB enjoyed the largest gains. A snapshot of the changes for the day shows:
- German DAX +0.30%
- France's CAC +0.80%
- UK's FTSE 100 +0.78%
- Spain's Ibex +0.68%
- Italy's FTSE MIB +0.89%
As London/European traders exit, US shares are also solidly higher:
- Dow industrial average which fell yesterday is rebounding today by 570.81 points or 1.25%.
- S&P index is up 53 points or 0.81% and traded to a new record high at 6586.75
- NASDAQ index is up 150 points or 0.68%. It to has been traded to a new record high at 22,048.65.
US yields are lower helping to fuel the rally. At 1 PM, the U.S. Treasury will auction off 30 year bonds completing the coupon auctions for the week. The 3 year and 10 year were met by strong international demand:
- 2 year yield 3.510%, -2.3 basis points
- 5 year yield 3.560%, -2.1 basis points
- 10 year yield 4.003%, -2.9 basis points
- 30 year yield 4.643%, -3.3 basis points.
Looking at other markets in the US midday shows:
- Crude oil $-1.20 or -1.92% at $62.45.
- Gold is down $-2.90 or -0.07% at $3639.
- Silver is up $0.56 or 1.43% at $41.70. That represents a new high for the year and new high going back to September 2011.
- Bitcoin is trading at $410 or 0.36% at $114,398.
The US dollar is lower versus all the major currency pairs. The biggest the decline is against the AUD with a fall of -0.73%.
- EUR -0.35%
- JPY -0.29%
- GBP -0.36%
- CHF -0.45%
- CAD -0.24%
- AUD -0.74%
- NZD -0.57%
