The euro traded in positive territory on Thursday after the European Central Bank left interest rates unchanged, delivering the widely expected pause while keeping investors focused on whether another increase could follow as soon as September.

The decision brought no immediate shock to currency markets. Instead, the euro’s next direction now depends on how strongly ECB President Christine Lagarde warns about the inflationary threat from surging energy prices during her press conference.

The Price

The euro traded around $1.14 against the US dollar following the announcement, holding close to a one-week high after showing only a limited initial reaction to the decision.

That muted movement reflected how thoroughly the pause had already been priced into the market. Traders had placed only a small probability on another immediate increase after the ECB raised borrowing costs by 25 basis points at its previous meeting in June.

ECB keeps rates unchanged

The European Central Bank maintained the deposit facility rate at 2.25%, the main refinancing rate at 2.40% and the marginal lending facility rate at 2.65%.

The decision temporarily interrupts the renewed tightening cycle that began in June, when policymakers raised rates for the first time after a prolonged period of monetary easing.

Yet this pause should not be mistaken for the end of the ECB’s inflation fight.

The central bank continues to face an uncomfortable combination of weakening economic momentum and renewed price pressures, leaving policymakers with little room for a decisive commitment in either direction.

Oil has transformed the debate

The most important change since the ECB’s previous meeting has not come from wages, consumer demand or domestic economic activity. It has come from the energy market.

Oil prices have surged toward $100 a barrel as the renewed conflict in the Middle East threatens shipments through some of the world’s most important maritime routes.

That creates a dangerous dilemma for the ECB. Higher energy costs can push headline inflation upward and spread through transport, manufacturing and food prices, but raising interest rates again could place additional pressure on an already fragile European economy.

The ECB is therefore attempting to buy time without appearing complacent.

Why the euro did not jump

An unchanged rate decision offered little reason for traders to chase the euro higher immediately. The outcome was almost entirely expected, meaning the currency market is now searching for signals about what comes next.

The crucial question is whether the ECB sees the recent energy shock as temporary—or as the beginning of a more persistent inflation problem.

A strongly hawkish message from Lagarde could encourage traders to increase expectations of a September rate increase, offering fresh support to the euro.

A more cautious tone, particularly one focused on slowing growth and weak demand, could suggest that the ECB remains reluctant to tighten policy again and leave the single currency vulnerable to renewed pressure.

September becomes the real decision

Today’s announcement may ultimately prove to be a pause between two rate increases rather than the beginning of a prolonged hold.

Eurozone inflation slowed to 2.8% in June but remains above the ECB’s 2% target, while the latest surge in oil prices threatens to reverse some of that progress over the coming months.

Financial markets are therefore increasingly treating the September meeting as the next genuine decision point. By then, policymakers will have more evidence about whether expensive energy is feeding into broader prices, wages and inflation expectations.

The central bank’s challenge is that waiting carries risks, but acting too quickly may deepen Europe’s economic slowdown.

Euro outlook

The euro’s immediate direction now rests less on the rates that were announced and more on the language used to explain them.

If Lagarde leaves the door clearly open to a September increase, EUR/USD could extend its recovery and attempt to move beyond its recent highs.

If she pushes back against aggressive market expectations and stresses the weakness of the European economy, the euro could surrender its early gains and retreat below the $1.14 area.

The ECB has paused, but the battle over European interest rates is far from over. For the euro, the most important announcement may not be today’s decision—it may be the warning hidden inside Lagarde’s next sentence.

Gold prices fell in European trading on Thursday, retreating from a two-week high as a renewed surge in oil prices intensified inflation concerns and strengthened expectations that the US Federal Reserve could raise interest rates later this year.

The precious metal initially benefited from escalating tensions in the Middle East, but the traditional safe-haven reaction was quickly overshadowed by the potential economic consequences of prolonged disruptions to global energy supplies. Higher oil prices threaten to keep inflation elevated, forcing central banks to maintain restrictive monetary policies for longer and reducing the appeal of non-yielding assets such as gold.

The Price

Spot gold dropped by 0.9% to $4,091.24 an ounce in the latest market update, after touching $4,165.87 in the previous session, its highest level since July 7.

US gold futures for August delivery declined by 1.4% to $4,093.80 an ounce. Despite the latest pullback, gold continues to defend the psychologically important $4,000 level, which has repeatedly attracted buyers during recent declines.

Oil changes the market equation

The latest pressure on gold followed a fifth consecutive rise in oil prices as instability surrounding key Middle Eastern shipping routes raised fears of a broader disruption to global supplies.

The Houthis said they had attacked two Saudi oil tankers as part of what they described as a naval blockade, potentially creating another major threat to energy shipments alongside existing concerns surrounding the Strait of Hormuz.

While geopolitical escalation would normally support gold, the sharp rise in crude prices has created a more complicated environment. Investors are increasingly focused on the possibility that expensive energy will fuel another inflationary wave, leaving the Federal Reserve with little room to ease monetary policy.

Markets are now pricing in roughly a 78% probability of a US interest-rate increase in September, up from 68% during the previous session. The Federal Reserve is widely expected to leave rates unchanged at next week’s meeting, but traders will closely examine its statement for signs that policymakers are preparing for further tightening.

Gold caught between fear and yields

Gold is currently being pulled in opposite directions. Military escalation and uncertainty over energy supplies are supporting demand for defensive assets, but rising Treasury yields and expectations of higher interest rates are increasing the opportunity cost of holding bullion.

This tension explains why gold has struggled to sustain gains despite an increasingly unstable geopolitical backdrop. A further surge in oil prices could initially generate safe-haven buying, but it may ultimately weigh on bullion if investors conclude that inflation will force central banks to remain aggressive.

The $4,000 level remains the key short-term line of defence. Holding above it could allow gold to stabilise and make another attempt to reclaim the $4,165 area, followed by the $4,200 barrier. A decisive break below $4,000, however, could expose the metal to a deeper correction toward $3,900.

Silver, platinum and palladium decline

Selling pressure extended across the wider precious-metals complex. Spot silver fell by 1.4% to $58.85 an ounce, surrendering part of its recent gains as higher bond yields weighed on investment demand.

Platinum declined by 0.9% to $1,629.63 an ounce, while palladium dropped by 1.5% to $1,272.03. Both metals remain sensitive not only to movements in gold and the US dollar, but also to expectations surrounding industrial activity and demand from the global automotive sector.

Gold outlook

The next major move in precious metals is likely to depend on developments in the Middle East, the direction of oil prices and incoming US economic data.

A weaker-than-expected labour-market reading could ease concerns about further monetary tightening and provide gold with fresh support. Strong employment data, combined with persistently elevated oil prices, would reinforce expectations of a higher-for-longer interest-rate environment and leave bullion vulnerable to renewed selling.

For now, gold remains above its most important psychological support, but its ability to recover will depend on whether safe-haven demand can once again outweigh the pressure from rising yields and increasingly hawkish interest-rate expectations.

The euro advanced against a basket of major currencies in European trading on Thursday, extending gains against the US dollar for a second consecutive session ahead of the European Central Bank's monetary policy decision later today.

The ECB is widely expected to leave interest rates unchanged after raising them by 25 basis points at its previous meeting. Markets will closely watch for signals that policymakers remain open to additional tightening at the September meeting if inflationary pressures continue to build amid the recent rise in global oil prices.

The Price

• The euro rose more than 0.2% against the US dollar to $1.1436, up from the day's opening level of $1.1411, after touching an intraday low of $1.1405.

• The euro closed 0.1% higher against the US dollar on Wednesday, marking its first daily gain in five sessions as it recovered from a one-week low of $1.1395.

European Central Bank

The European Central Bank will conclude its fifth monetary policy meeting of 2026 later today, with markets expecting interest rates to remain unchanged. Investors will focus on the accompanying policy statement for fresh guidance on the outlook for interest rates over the remainder of the year.

Current expectations point to the ECB keeping its key interest rate unchanged at 2.40%, the highest level since April 2025, following the 25-basis-point increase delivered at the previous meeting.

The ECB's interest rate decision and monetary policy statement are due at 12:15 GMT, followed by ECB President Christine Lagarde's press conference at 12:45 GMT.

According to some forecasts, the ECB is expected to keep the door open for another interest rate hike in September, as the latest surge in energy prices threatens to reignite inflationary pressures across Europe.

Analysts believe that with oil prices climbing back above $90 per barrel due to the renewed conflict in the Middle East, the ECB could be forced to tighten policy again this autumn to prevent higher energy costs from triggering a broader inflationary spiral.

Euro outlook

We expect the euro to extend its gains against a basket of major currencies if the European Central Bank delivers a more hawkish message than markets currently anticipate, boosting expectations for a September interest rate hike.

The Australian dollar traded broadly higher against a basket of major currencies during Thursday's Asian session, resuming gains against its US counterpart after a two-day pause and moving closer to its highest level in five weeks following the release of stronger-than-expected Australian labor market data.

The figures highlighted the resilience of the Australian economy and pointed to increasingly tight labor market conditions, reinforcing market expectations that the Reserve Bank of Australia (RBA) may deliver another interest rate hike later this year.

The Price

• The Australian dollar rose 0.35% against the US dollar to 0.7021, up from the day's opening level of 0.6996, after touching an intraday low of 0.6987.

• On Wednesday, the Australian dollar closed down by less than 0.1% against the US dollar, marking its second consecutive daily decline as traders continued profit-taking and corrective selling after the currency reached a five-week high of US$0.7027.

Australian labor market

Data released by the Australian Bureau of Statistics on Thursday showed net employment increased by 76,300 jobs in June, the strongest monthly gain since April 2025. The reading far exceeded market expectations for an increase of 16,400 jobs. Meanwhile, May's figure was revised higher to a gain of 44,000 jobs from the previously reported 40,300.

The Australian economy adds jobs at the fastest pace in 14 months.

Government data also showed the unemployment rate held steady at 4.4% in June, matching market expectations and unchanged from May.

Australia's unemployment rate remains in line with expectations in June.

The latest data indicates that tight labor market conditions continue to strengthen, increasing pressure on policymakers at the Reserve Bank of Australia and reinforcing expectations of another interest rate hike later this year.

Australian interest rates

• Following the release of the data, market pricing for a 25-basis-point interest rate hike by the Reserve Bank of Australia in August rose to above 35%.

• Pricing for a 25-basis-point rate hike before the end of the year climbed from 78% to 97%.

• Investors will now look for additional inflation and wage data from Australia to further refine interest rate expectations.

Australian dollar outlook

We expect the Australian dollar to remain in positive territory against the US dollar, with the potential to post fresh five-week highs, supported by continued demand for the currency as one of the more attractive opportunities in the foreign exchange market.