US Dollar Forecast: Lagarde Warns of Trade Risks as Euro Recovers, DXY Slides

ECB Rate Cut Pressures US Dollar Index as Euro Recovers

The European Central Bank (ECB) cut its deposit rate by 25 basis points to 2.75%, marking its fifth reduction since June. This move was widely expected as policymakers respond to weak economic growth and moderating inflation. President Christine Lagarde emphasized the ECB’s data-dependent approach, stating that no pre-commitments are being made regarding future rate cuts.

Following the decision, the euro recovered from earlier losses, and EUR/USD turned flat to slightly positive. Meanwhile, the US Dollar Index (DXY), which is heavily weighted by the euro, erased its earlier gains and moved lower. This reaction suggests that traders had largely priced in the ECB’s dovish stance, shifting their focus to potential US monetary policy moves.