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Published: 12 June 2026,06:02
Daily Market Analysis New
*The ECB raised rates by 25 bps, lifting the deposit facility rate to 2.25%, as policymakers respond to rising inflation risks from Middle East tensions and higher energy prices. Inflation outlook revised higher
*The ECB increased its 2026 headline inflation forecast to 3.0%, reinforcing its commitment to bring inflation back toward the 2% target while trying to prevent second-round effects. Euro reaction remains muted despite rate support
*EUR/USD stayed near 1.15 as the hike was already priced in. The euro may benefit from higher yields, but upside remains limited by geopolitical risks, energy inflation, and potential Fed hawkishness.
The European Central Bank (ECB) announced its monetary policy decision on June 11, 2026, delivering a widely anticipated 25 basis point rate hike. This marks the ECB’s first rate increase in several years, lifting the deposit facility rate to 2.25%, the main refinancing operations rate to 2.40%, and the marginal lending facility rate to 2.65%, effective June 17. The move was described as unanimous and aimed at countering upside inflation risks stemming from the ongoing Middle East conflict and elevated energy prices.
In its updated staff projections, the ECB revised 2026 headline inflation upward to 3.0% (from 2.6% previously) while maintaining a medium-term commitment to returning inflation to the 2% target. ECB President Christine Lagarde emphasized the need to prevent second-round effects from the geopolitical energy shock, while acknowledging moderate Eurozone growth and avoiding any strong pre-commitment to future hikes.
The euro showed a muted initial reaction to the decision. While the hike was fully priced in, EUR/USD struggled to gain sustained ground, trading near the 1.15 level amid broader U.S. dollar resilience and lingering geopolitical uncertainties.
Near-term outlook for the Euro remains cautiously constructive but faces headwinds. The rate hike provides underlying support through higher Eurozone yields and improved interest rate differentials. Further modest tightening signals in coming meetings could bolster the single currency toward the 1.16–1.18 range if accompanied by de-escalation in the Middle East or softer U.S. data. However, persistent energy-driven inflation concerns, any renewed geopolitical flare-ups, and a potentially hawkish Federal Reserve next week may limit upside and keep EUR/USD under pressure. Volatility is expected to stay elevated around key data releases and central bank communications.
Technical Analysis
EUR/GBP has been trading within a lower-high price structure, indicating that the broader trend remains tilted to the downside and supporting a bearish bias in the near term. The series of lower highs suggests that sellers have continued to cap rallies, preventing the pair from establishing a sustained recovery.
However, recent price action indicates that bearish momentum may be beginning to fade. The pair has once again found support near the 0.8615 level, a significant support zone that has successfully held for approximately nine months. The repeated defense of this area highlights strong buying interest and suggests that sellers are struggling to push the pair decisively lower.
The resilience of the 0.8615 support level raises the possibility that the pair may be forming a base for a potential recovery. While the bearish structure remains intact for now, the ability of buyers to consistently defend this zone is an encouraging sign for bulls.
Momentum indicators are also beginning to support the case for a potential reversal. The Moving Average Convergence Divergence (MACD) has been forming a higher-low pattern despite the pair trading near its support zone. This positive divergence suggests that downside momentum is weakening and that selling pressure may be gradually losing strength.
Should EUR/GBP continue to hold above the 0.8615 support level and build upward momentum, the probability of a bullish trend reversal will increase significantly. A break above key resistance levels would then provide further confirmation that the pair is transitioning away from its bearish structure.
Resistance Levels: 0.8670, 0.8720
Support Levels: 0.8615, 0.8560
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