Sources say the European Central Bank (ECB) will discuss a more negative economic outlook next week due to recent tariff threats. However, at the meeting on July 24, the ECB is expected to keep interest rates steady, focusing on how tariffs might affect the economy. A decision to lower rates may be postponed until September. Following this news, the EURUSD has dropped below the 1.3663 – 1.3691 range seen in both daily and hourly charts. The report shows the ECB is taking a cautious approach as it prepares for its meeting next week. The central bank is paying attention to the economic strains caused by rising tariff issues, which are impacting previously steady growth forecasts. While no rate changes are expected this month, the ECB is modeling weaker economic scenarios. Changing monetary policy now might be too soon, especially since we don’t yet know the full impact of tariff threats on Europe’s economy. With the ECB likely to hold off on action in July, focus will shift to the September meeting. By then, the ECB will have summer economic data and a clearer picture of trade policies. Meanwhile, the euro has reacted predictably to the softer outlook—it’s falling. The drop below the 1.3663 to 1.3691 range indicates expectations for European growth and monetary policy are changing. For those analyzing market changes related to derivatives, the EURUSD’s decline requires adjustments. The previous levels acted as minor supports on daily and intraday charts. Since those levels have been crossed, prices could move closer to short-term selling targets. The directional bias has shifted from neutral. From a strategy standpoint, short-term bearish approaches should be preferred while downward momentum persists. Delta should be adjusted because implied volatility may rise as we anticipate stronger ECB comments in September. We expect larger fluctuations in FX volatility, especially before major economic releases. We will need to reassess exposure further out as guidance becomes clearer. Gamma will mostly favor defensive strategies unless we see significant changes. Also, we’ve noticed that regular correlations between interest rate expectations and spot prices are returning. These movements are not random. It’s important to respond to established expectations rather than just headlines. As the euro weakens due to worsening forecasts, it becomes easier to adjust trades connected to central bank responses. Finally, hedging portfolios that focus on September rate expectations may gain importance in the coming days. This is not the time to chase rebounds in the euro without a solid reason. Instead, it makes sense to adjust option strike levels, keeping costs efficient while capturing opportunities based on increasingly negative policy scenarios.

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