ECB policymaker Gediminas Šimkus has shared his views on interest rates. He mentioned that while some economic risks are coming up, there are no immediate plans to change rates. Šimkus takes a careful approach as the economy shows some weaknesses. Now that summer is over, we can expect more comments from ECB officials ahead of their policy meeting on September 11. The European Central Bank has made it clear they won’t take immediate action, but it seems a rate cut may be considered later this year. With the September 11 meeting just over a week away, we should hear more from them. This strategy of holding rates steady now while hinting at future cuts creates a trading opportunity. This cautious outlook is supported by recent economic data. August 2025’s inflation estimate for the Eurozone is 1.9%, which is below the 2% target and continues the downward trend since spring. Also, recent data shows German factory orders unexpectedly dropped, indicating the economy is slowing faster than expected. For traders in interest rate derivatives, this suggests preparing for lower rates ahead. Interest in December 2025 Euribor futures is rising, as they would benefit from a rate cut before the year ends. This allows traders to focus on a likely downturn in the fourth quarter rather than just the expected hold on September 11. The uncertainty before the announcement is also important. We might consider using options on the Euro STOXX 50 index to take advantage of expected volatility. For example, buying a straddle lets us profit from significant market movements in either direction after the ECB’s press conference. In the currency market, this outlook adds pressure to the EUR/USD pair. We can use options to bet on the Euro weakening, particularly since the US Federal Reserve seems set to keep its rates steady for a longer time. A drop below the 1.06 support level we saw in July 2025 appears more likely now. We’ve witnessed this pattern before, especially leading up to the first rate cut in June 2024. The ECB hinted at its plans for months before taking action, allowing the market to adjust gradually. This historical trend suggests that while September may see no changes, the overall direction is toward lower rates.

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