Title: Euro Holds Steady as ECB Stands Pat on Rates: EUR/USD Hovers Near 1.07, EUR/GBP Remains Flat
By: James Humphreys – ExchangeRates.org.uk
The euro remained broadly stable on Wednesday, September 11, 2025, after the European Central Bank (ECB) left interest rates unchanged, opting to hold the deposit rate at 4.00 percent. Investors appeared to have largely anticipated the decision following recent data showing further weakness in the eurozone economy.
The decision, which was widely expected by markets, came amid growing concerns about persistently low inflation and stagnating growth. As a result, the euro saw muted reaction across currency pairs, particularly against the British pound (GBP) and the US dollar (USD), with the EUR/GBP exchange rate trading flat, and EUR/USD holding close to the 1.07 level.
Market Overview: Flat Reaction to ECB’s Decision
– The ECB opted to keep its key deposit rate unchanged at 4.00 percent.
– Eurozone economic indicators show a weakening growth trajectory, raising concerns about a potential slowdown.
– Inflation remains below the ECB’s 2 percent target, signaling limited scope for additional rate hikes in the near term.
– The EUR/USD pair hovered around the 1.0700 mark, reflecting a wait-and-see sentiment among traders.
– The EUR/GBP exchange rate remained largely unmoved, demonstrating the market’s expectation of ECB policy inertia.
ECB Stance: Balancing Inflation and Economic Weakness
In its monetary policy statement, the ECB elaborated on its assessment of the economic landscape. Officials acknowledged the slowing pace of activity across the eurozone, attributing it to weak demand, tighter financing conditions, and waning investment confidence.
Key points from the ECB policy meeting:
– The central bank’s Governing Council reiterated its commitment to ensuring inflation returns to its medium-term target of 2 percent.
– Policymakers noted that past increases in interest rates were taking an increasing toll on credit demand and overall economic momentum.
– The ECB did not provide forward guidance on rate reductions, instead suggesting a data-dependent approach.
– Asset purchase programs and long-term refinancing operations were left unchanged.
President Christine Lagarde emphasized during the post-meeting press conference that interest rates are now at levels that, if maintained, will make a substantial contribution to returning inflation to target. However, she warned that inflationary pressures persist in areas such as services and energy markets.
Economic Data Highlights Eurozone Fragility
The ECB’s cautious approach reflects growing weaknesses in the eurozone economy. Recent survey data and industrial output figures have intensified concerns about a sustained economic slowdown heading into the final months of 2025.
Key economic indicators:
– The eurozone’s composite PMI (Purchasing Managers Index) for August remained in contraction territory at 47.9, below the 50 threshold that separates expansion from contraction.
– German industrial production in July contracted by 1.6 percent month-on-month, marking another disappointing result for the bloc’s largest economy.
– Eurozone retail sales were flat in August, suggesting subdued consumer demand despite falling inflation.
– Headline inflation in the eurozone dipped to 2.5 percent in August, down from 5.1 percent a year earlier.
– Core inflation, which excludes volatile food and energy prices, stood at 2.9 percent year-on-year, indicating that underlying price pressures are easing but not fully resolved.
Forex Market Impact: EUR/USD and EUR/GBP Steady
The euro exchange rates held relatively steady after the ECB decision, indicating a lack of surprise in the bank’s policy course. With expectations for policy tightening largely priced in, traders are now closely analyzing incoming data for clues about the timing of a potential pivot toward rate cuts.
EUR/USD Outlook:
– The EUR/USD exchange rate traded narrowly around 1.0700 following the announcement, with limited volatility suggesting
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