Stock exchanges in Europe commence with losses, investors braced for upcoming gathering
The European Central Bank (ECB) is set to hold a monetary policy meeting this week, with attention focused on any clues about the next steps from ECB President Christine Lagarde. The current monetary policy of the ECB, as of mid-2025, involves a recent interest rate cut of 25 basis points (0.25%), decided at the June meeting.
This move comes amid updated forecasts showing inflation close to the ECB’s symmetric target of 2%, with projections of 2.0% for 2025 (down from 2.3%), 1.6% for 2026, and back to 2.0% in 2027. Core inflation, which excludes volatile energy and food prices, is expected to ease from 2.4% in 2025 to 1.9% in 2026–2027. Meanwhile, GDP growth forecasts remain modest but positive at 0.9% in 2025, with slight rebounds projected in the following years.
President Lagarde provided important clues about the ECB's next steps during the announcement. She indicated that the ECB is approaching the end of the current monetary policy tightening cycle, suggesting the possibility of a pause in further rate hikes or cuts following the recent reduction. This signals a shift in the ECB’s stance, reflecting that inflation is nearing target levels and economic growth is stabilizing.
The ECB's monetary policy strategy emphasizes maintaining price stability around a symmetric 2% inflation target, using interest rates as its primary tool. In exceptional times, additional measures like quantitative easing (QE) or tightening (QT) can be deployed, but currently, the focus remains on carefully managing interest rates given the economic outlook.
With the next ECB policy decision scheduled for July 24, 2025, markets will closely watch President Lagarde’s statements for further guidance on whether additional rate cuts might be considered in the future, especially amid the downgrades in inflation and economic growth forecasts. Overall, the ECB’s posture appears cautiously accommodative but data-dependent, holding the door open for stabilization rather than immediate tightening or aggressive easing.
Meanwhile, other financial markets showed mixed reactions. London was the exception, as it was up 0.18%. German 10-year bond yields were down at 2.650%. West Texas Intermediate crude oil reference in the US was down, at $65.99. Brent crude oil reference in Europe for September delivery was down at $69.17. Wall Street futures advanced with moderate gains of around 0.25%.
Gold per troy ounce was up at $3,366.50, with the current all-time high of $3,432.34 on June 13. The euro appreciated to $1.1617 in the Frankfurt foreign exchange market, reaching a new high since September 15, 2021, of $1.1789 on July 2. The Dow Jones closed down 0.32% at 44,342.19 points, compared to its maximum since inception in 1896, of 45,014.04 points, on December 4, 2024.
The Nasdaq, the high-tech stock index, closed up 0.05% at 20,895.66 points, a new high. Stock exchanges in Paris and Frankfurt were down 0.28% and 0.11%, respectively. The Lisbon stock exchange maintained its opening trend, and at 09:00, the main index, the PSI, was up 0.28% at 7,695.66 points. The EuroStoxx 600 was down 0.05% at 546.75 points around 09:00 in Lisbon.
Elsewhere, Irish low-cost airline Ryanair announced a net profit of €820 million in the first fiscal quarter (April-June), up 127.7% from the same period last year. German Chancellor Friedrich Merz is meeting with executives from various large companies, such as Deutsche Bank and Siemens. Stock exchanges in Madrid and Milan were down 0.14% and 0.69%, respectively. The current maximum for the PSI since May 6, 2011, of 7,791.75 points, was recorded on July 9.
In addition to the ECB's policy decision, markets will also be watching the release of preliminary PMI estimates. Bitcoin rose 1.08% to $119,418, following its all-time high on July 14 of $123,000. The current maximum for the PSI since May 6, 2011, of 7,791.75 points, was recorded on July 9.
[1] Source: European Central Bank (ECB) press release, June 2025 [2] Source: ECB Strategy Review, published in December 2024 [3] Source: ECB staff macroeconomic projections, released in June 2025 [4] Source: Reuters, July 2025
- As the European Central Bank (ECB) considers its next steps in monetary policy, investors are closely watching the stock-market responses to the ECB policy decision and the release of preliminary PMI estimates, with technological companies on the Nasdaq experiencing growth and other indices showing mixed results.
- In the world of finance, the ECB's monetary policy decision, its approach to business investment through interest rates, and the potential impact on the stock-market are crucial factors for investors, particularly given the recent updates in inflation and economic growth forecasts and the upcoming meetings of central bank leadership.
