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The European Central Bank cut interest rates as expected on Thursday, easing for the seventh time in the past year as U.S. tariffs and faltering business confidence sap already weak economic growth.

Arguing that inflation is well on its way to the 2% target, the central bank for the 20 nations sharing the euro cut its deposit rate by 25 basis points to 2.25%, in line with the expectation of most economists polled by Reuters.

It also tweaked its language, dropping a previous assessment that interest rates are "meaningfully less restrictive", arguing instead that several factors may weigh on growth now.

"Increased uncertainty is likely to reduce confidence among households and firms, and the adverse and volatile market response to the trade tensions is likely to have a tightening impact on financing conditions," the ECB said.

"These factors may further weigh on the economic outlook for the euro area," the ECB said in a statement.

The change comes as interest rates are now at the top end of the ECB's "neutral rate", a level which neither restricts nor stimulates economic growth.

The bank has previously put this range at 1.75% to 2.25% but policymakers have downplayed the significance of the figures, arguing that it is conceptually important but not relevant to day-to-day policymaking.

Still, the bank maintained its past guidance that the disinflation process is well on track.

Financial markets still expect at least two more rate cuts from the ECB this year and some even see a third move because financial market volatility, tariffs and economic uncertainty are all likely to weaken growth and consequently inflation.

But the ECB gave little to no hint about future moves, maintaining its standard line that its next decision would depend on the evolution of incoming data and it would stick to its meeting-by-meeting approach.

Nevertheless, Lagarde, who will speak at a 1245 GMT news conference, is likely to say that the bloc is facing a large hit to economic growth and even if there is an eventual trade deal, the hit to confidence will have a meaningful impact.

She earlier predicted a growth hit of up to 0.5 percentage point, a figure that would wipe out half the bloc's expected expansion.

Lagarde is also likely to argue that inflation pressures have eased meaningfully since the ECB's March meeting, given a sharply stronger euro, a big fall in energy costs and more muted growth prospects.

She may also argue that big U.S. tariffs on China would force Beijing to dump goods on other markets, possibly weighing on prices and cutting inflation quicker than earlier thought.

Source: TradingView

Source: TheGuardian

Source: Reuters

“Perhaps the market is getting excited that the UK will have a trade deal before the EU. The EU vs. US negotiations are likely to be rockier than UK and US but not nearly as bad as US and China. Sounds like a deal on the UK could happen quite soon,” he adds, and suggests "its mostly GBP pushing the DXY lower now."

Above: GBP/USD at daily intervals with Fibonacci retracements and selected moving averages highlighting possible areas of technical support. Click for closer inspection.

GBP/EUR unwound all of its prior rally on Wednesday but was supported by tightened limits enforced in EUR/CNY, and EUR/USD, from Beijing. These prevented EUR/CNY rising above 8.3424 and led to suppressive pushback around 1.1387 in EUR/USD, levels which rose to 8.4119 and 1.1513, respectively, on Thursday.

Above: GBP/EUR at daily intervals with ICE US Dollar Index.

Source: Poundsterlinglive

President Donald Trump on Thursday again called for the Federal Reserve to lower rates and even hinted at the "termination" of Chairman Jerome Powell.

In a Truth Social post, Trump said:

"The ECB is expected to cut interest rates for the 7th time, and yet, 'Too Late' Jerome Powell of the Fed, who is always TOO LATE AND WRONG, yesterday issued a report which was another, and typical, complete 'mess!' Oil prices are down, groceries (even eggs!) are down, and the USA is getting RICH ON TARIFFS. Too Late should have lowered Interest Rates, like the ECB, long ago, but he should certainly lower them now. Powell's termination cannot come fast enough!"

Indeed, the European Central Bank has been cutting rates as it tries to boost growth in the region. The ECB is expected to lower rates again later on Thursday.

The post comes a day after Powell delivered a speech at the Economic Club of Chicago in which he noted that the administration's tariffs put the central bank in a tricky spot as it decides whether to tame inflation or boost growth.

"If that were to occur, we would consider how far the economy is from each goal, and the potentially different time horizons over which those respective gaps would be anticipated to close," Powell said. Those comments contributed to a steep sell-off on Wednesday.

This isn't the first time Trump has criticized Powell's approach to U.S. monetary policy. Trump posted on April 4, two days after the administration's "Liberation Day" tariff announcement, it would be "a PERFECT time for Fed Chairman Jerome Powell to cut Interest Rates. He is always 'late,' but he could now change his image, and quickly."

However, it's the first time Trump has explicitly called for Powell's firing. Powell has also said the president doesn't have the power to fire him, noting that it's "not permitted under the law."

Powell's term as Fed chairman ends in May 2026.

Source: CNBC

Source: Euronews