BofA: ECB Meeting Presents Minor Downside Risk for the Euro

ECB Policy Decision: The European Central Bank is expected to keep key interest rates unchanged in their upcoming policy decision, with only minor adjustments anticipated in the communication from President Lagarde.

Market Expectations: Traders are pricing in minimal rate cuts by year-end and into mid-2026, but BofA suggests that actual rates may be lower due to growth risks in the euro area and tighter financial conditions.

Press Conference Insights: BofA expects Lagarde to acknowledge the US-EU trade deal while highlighting increased macroeconomic risks, indicating a slightly dovish tone without committing to future rate changes.

FX Market Impact: The meeting is anticipated to have a limited impact on foreign exchange markets, with BofA leaning bearish on the euro against the pound and Australian dollar.