Goldman Sachs updates its 2025 forecast, predicting the ECB deposit rate will remain at 2%
by VT Markets
/
Jul 25, 2025
Goldman Sachs has changed its outlook for the European Central Bank’s (ECB) deposit rates. They no longer expect a 25 basis points cut in September 2025.
The new prediction shows that the deposit rate will remain at 2%, instead of the previously expected 1.75%.
Impact On The Euro
This updated forecast is likely to help the euro strengthen. It indicates a shift in how economists view the economy.
With this new outlook, we believe the euro could perform better in the near future. Recent data also supports this belief, as Eurozone inflation unexpectedly increased to 2.6% in May, making it less likely for further rate cuts to occur. Therefore, we should consider strategies like buying EUR/USD call options or taking long positions in euro futures.
A higher expected terminal rate could pose challenges for European stocks. Increased borrowing costs can reduce company profit margins, potentially leading to a slowdown in indices like the Euro Stoxx 50. This suggests we might want to buy put options on these indices as a way to hedge or bet on a downward trend.
Market Volatility And Strategy
This change in outlook will probably lead to more market volatility as traders adjust their positions. ECB President Christine Lagarde described the path to reducing inflation as “bumpy,” adding to the uncertainty. Because of this, trading options on volatility indices like the VSTOXX could be more appealing.
Historically, when the central bank hints at pausing or ending an easing cycle, the euro usually gains value. We’ve seen similar patterns in the past when rate expectations shifted unexpectedly. This history supports our view that taking long positions in the euro is the best way to align with this revised forecast.
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by VT Markets
Jul 25, 2025
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