## Who Will Dominate the Euro's Future After the June Central Bank Decision?

The European Central Bank (ECB) is set to announce a new interest rate decision on June 5th, and market attention on this meeting continues to intensify. According to the latest data from LSEG, investors have fully priced in a 25 basis point rate cut expectation and generally anticipate another rate cut within the year. Under such policy expectations, how will the euro's trend unfold?

## Inflation Retreat Supports Rate Cut Expectations

Recently released economic data have laid the groundwork for further easing by the ECB. The harmonized CPI YoY preliminary figure for May in the Eurozone was 1.9%, the first time in eight months that it has fallen below the ECB's 2% inflation target. The easing of price pressures, coupled with the impact of Trump's trade policies on Europe's economic outlook, has made rate cuts a common expectation among analysts.

According to market consensus, the ECB's rate cut this time will be 25 basis points, with the deposit rate expected to be lowered from the current 2.25% to 2%. This will be the eighth rate cut by the ECB in the past year. Notably, when releasing quarterly forecasts, the ECB is expected to simultaneously lower its outlook for both inflation and economic growth for the year.

## There May Still Be Room for One More Rate Cut This Year

Strategists generally believe that the market has already priced in further easing. Market expectations are that the ECB will cut interest rates once more in the remaining months of this year, after which the deposit rate will stabilize around 1.75%. This policy path reflects the ECB's tendency to maintain a relatively moderate easing stance amid the slowdown in global economic growth.

## Weak US Dollar Supports Euro

From a purely rate-cut perspective, easing policies typically weaken a currency. However, analysis from UY Bank points out that the overall weakening trend of the US dollar provides strong support for the euro, meaning that even if the ECB cuts rates, the euro's reaction will be limited. Danske Bank analysts also believe that the dollar needs a clear improvement in US economic data to regain upward momentum, and until then, the EUR/USD exchange rate will continue to show strength.

## EUR/CNY Exchange Rate Expected to Remain Stable

Looking at the EUR/USD trend, this currency pair is expected to stay within the 1.10-1.15 USD range. There is clear buying support during downward movements, effectively limiting the euro's downside. This resilience will also positively influence the EUR/CNY forecast—continuing euro strength against the dollar will help ease the depreciation pressure on the yuan relative to the euro.

Overall, even if the ECB cuts rates as scheduled on June 5th, the complex macro environment suggests that the euro is unlikely to experience significant depreciation. Multiple factors will offset each other, helping to keep the euro's trend relatively stable.