Luis de Guindos: Presentation of the ECB Annual Report 2025 to the Committee on Economic and Monetary Affairs of the European Parliament
At a Glance
The desk anticipates a sustained stability in the euro area, bolstered by the ECB's commitment to price stability and a gradual normalization of monetary policy. Per the full note source, the ECB's recent decision to maintain the deposit facility rate at 2.0% reflects confidence in the ongoing disinflation process, with inflation averaging 2.1% in 2025. This outlook aligns with our consensus target of 1.075 for EUR/USD, as we see potential for the euro to strengthen against the dollar amid a resilient economic backdrop. However, upcoming inflation data on June 2 could serve as a catalyst for market movements.
Key Takeaways
- 01The ECB maintains a deposit facility rate of 2.0%, reflecting confidence in the euro area's economic recovery.
- 02Inflation in the euro area averaged 2.1% in 2025, closely aligning with the ECB's medium-term target.
- 03The upcoming inflation data on June 2 could act as a significant market catalyst.
- 04The ECB's commitment to a symmetric inflation target allows for flexibility in policy responses.
Full Analysis
What the desk is arguing
The desk posits that the ECB's current monetary policy stance will support the euro's stability against the dollar. The ECB's Vice-President, Luis de Guindos, highlighted a moderate recovery in the euro area, with growth at 1.4% and inflation closely tracking the ECB's target, which underpins this view. Per the full note source, the ECB's data-dependent approach suggests that any shifts in economic indicators will be closely monitored, particularly in light of external uncertainties.
Supporting this thesis, the ECB's decision to keep interest rates unchanged, alongside a robust labor market and moderating inflation, indicates a cautious yet optimistic outlook. The ECB's commitment to a symmetric inflation target of 2% allows for flexibility in response to economic fluctuations, which could further bolster the euro's position. The disinflation process remains on track, with inflation averaging 2.1%, providing a solid foundation for the ECB's policy decisions.
Where it sits in our coverage
Our consensus target for EUR/USD is 1.075, with a range of 1.04 to 1.12. Notable firm targets include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)
This view aligns with jpmorgan, which anticipates a stronger euro, while bofa presents a more cautious outlook at the lower end of the range. The desk's call is positioned toward the upper bound of the consensus spread, suggesting a bullish sentiment on the euro.
How other firms see it
Firms like jpmorgan and citi are aligned with the desk's optimistic view on the euro's strength, citing the ECB's effective management of inflation and economic growth. Conversely, bofa and deutsche express a more bearish stance, focusing on potential external shocks and their impact on the euro area.
Key currency pairs to watch include EUR/USD and EUR/GBP, as the ECB's policy decisions will likely influence these trajectories in the near term. Additionally, the relationship between the ECB's interest rate decisions and US monetary policy will be crucial in shaping market sentiment.
Market Implications
Traders should monitor the upcoming inflation data on June 2, as it could impact the ECB's future policy decisions and the euro's strength against the dollar. A stronger-than-expected inflation print could reinforce the bullish outlook for EUR/USD.
What changed vs prior statement
- 01Cipollone addresses tokenisation's transformative potential as general-purpose technology requiring system-wide coordination; de Guindos focuses on 2025 economic recovery and monetary policy normalisation.
- 02Cipollone emphasizes central bank positioning on digital assets and financial efficiency; de Guindos highlights disinflation success, rate cuts completed, and strategy assessment reaffirmed.
- 03Cipollone discusses DLT architecture coordination problems and market configuration challenges; de Guindos notes euro area resilience amid global uncertainty and data-dependent policy approach.
From the original
SPEECH Presentation of the ECB Annual Report 2025 to the Committee on Economic and Monetary Affairs of the European Parliament Introductory remarks by Luis de Guindos, Vice-President of the ECB, at the ECON Committee of the European Parliament Brussels, 4 May 2026 It is a privilege to present the ECB’s Annual Report for 2025 to this Committee. As you may know, it is the last time I will do so, as my eight-year mandate as Vice-President comes to an end later this month. That makes today’s…
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Monetary policy decisions
The desk interprets the ECB's decision to maintain interest rates amid rising inflation risks as a signal of cautious optimism, balancing the need for price stability with growth concerns. Per the full note [source], the ECB acknowledges intensified risks from the ongoing Middle East conflict, which has driven energy prices higher and could impact inflation and economic sentiment. With inflation expectations rising in the short term, the ECB's commitment to a data-dependent approach suggests that future rate decisions will be closely tied to incoming economic data. Upcoming CPI releases on June 2 will be critical for gauging inflation trends and the ECB's subsequent policy stance.
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