By Matthew Ryan, Head of Market Strategy Ebury International Payments Company

The decision may in part to be attributed to increased trade uncertainty, which President Lagarde has repeatedly stressed during a press conference, as well as the extent of recent cuts, which have reduced interest rates to levels that can be considered as “neutral”.

Certifying her approach, President Lagarde reiterated that the bank was in a “good position”. He re -emphasized the dependence on the data, while avoiding explicit commitments on the bank’s future actions. He also skillfully avoided the question about a possible fall rates in the fall rates, which had been part of the Bank’s main scenario in June.

We believe that her tone was restrained. Lagarde has repeatedly underlined the recent positive inflation, with the bank appearing that prices will remain in accordance with the target in the medium term.

The Eurozone economy’s resilience was also underlined, which is a surprise, given the recent statements by Vice President De Guindos at the Sintra conference, where he noted that growth remains weak, with the second and third trimester expected to develop steady growth.

The main difference in the press release compared to June was the emphasis on “uncertainty”, which we consider the central theme of the July meeting.

The ECB remains clearly careful about the outcome of the US-EU trade negotiations, which we consider critical to the short-term prospects of the public block economy-interesting that Lagarde has openly warned that US duties would have a deflationary impact on the Eurozone.

However, with recent reports suggesting that an agreement between the parties could be at the forefront, the bank’s communication in September may provide greater accuracy.

The ECB is clearly in no hurry to lower interest rates again, although we believe it keeps its choices open and will be waiting for further news about commercial talks and the economy before committing to further relaxation. With the exception of a collapse in the US-EU trade negotiations, we believe that the ECB will probably remain at least for the next two meetings. However, we will not be overly surprised if we look at one last interest rate reduction by the end of the year, if growth remains weak or the upcoming inflation prints surprise negatively.