François Villeroy from the European Central Bank talked about the strong performance of the French and Eurozone economies. He mentioned that US tariffs would have a small impact on inflation in the Eurozone. He also suggested that future interest rates are more likely to go down instead of up. Villeroy was not worried about the independence of the Bank of France or the ECB. He highlighted that the risks of inflation decreasing are greater than those of it increasing. He stressed the need to follow international laws regarding Russian assets.

Euro Performance Against Currencies

The Euro had mixed results against major currencies. It gained 0.73% against the Australian Dollar and was up 0.35% against the US Dollar. However, it dropped slightly by 0.03% against the Swiss Franc. Other insights also touched on international finance topics. These included potential inflation shifts in Australia and trade tensions that could affect USD/JPY rates. There was also commentary on broker ratings for 2025, offering guidance for trading currencies, especially the Euro and Gold. Legal terms state that this information is for educational purposes only. It is important to do thorough research before making any investment decisions. The accuracy and timeliness of the content are not guaranteed, and FXStreet is not responsible for any potential errors or risks.

ECB’s Potential Policy Shift

The European Central Bank is hinting that its next interest rate move is more likely to be a cut rather than an increase. A senior official indicated that inflation risks are tilting downward, suggesting a more dovish approach in the future. This could lead the ECB to start reducing rates before other major central banks. This dovish view matches recent data. The latest Eurostat flash estimate for September 2025 showed that headline inflation unexpectedly dropped to 1.9%, just below the ECB’s target. Additionally, preliminary Q3 GDP figures pointed to a slight economic slowdown, giving the bank more reason to lower rates. In contrast, US inflation data has been stubborn. The last core reading remained steady at 2.8%, leading the Federal Reserve to proceed with caution. This growing divide in policy makes strategies, like buying EUR/USD put options, appealing. Such moves let traders wager on a falling exchange rate as interest rates are expected to diverge in favor of the dollar. Looking back, we remember the aggressive rate hikes by global central banks in 2022 and 2023. The ECB’s potential shift away from this strategy indicates a significant change. Therefore, we should closely monitor options pricing, as the implied volatility on the Euro may not yet fully account for the risk of a major rate cut in the near future. Create your live VT Markets account and start trading now.

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