The euro declined at the open of European markets on Friday against a basket of global currencies, extending losses for a second consecutive session versus the US dollar and retreating from its two-week high as profit-taking and technical corrections persist.

Despite the drop, the single European currency remains on track for a weekly gain, buoyed by the hawkish tone of the European Central Banks latest meeting, during which it paused its monetary easing cycle.

This decision came amid ongoing uncertainty over the potential impact of higher US tariffs on economic activity in Europe, adding to doubts over the likelihood of a rate cut in September.

The Price

EUR/USD fell 0.1% to $1.1734 as of todays session open at $1.17477, after recording a high of $1.1759.

On Thursday, the euro lost 0.2% its first decline in five sessions after hitting a two-week high of $1.1775 earlier in the day, with the dip attributed to correction and profit-taking.

Weekly Performance

Over the course of the week set to conclude with Fridays close the euro is up approximately 0.95% against the dollar, on track to post its first weekly gain in three weeks.

European Central Bank

As expected, the ECB left its key interest rates unchanged on Thursday at 2.15%, maintaining the lowest level since October 2022 after seven consecutive rate cuts in previous meetings.

The central bank opted for a pause in its monetary easing, awaiting clarity on future US-EU trade relations. The European Commission stated that a negotiated solution is within reach ahead of the August 1 deadline.

The ECB noted that inflation is currently stable around 2%, aligning with its medium-term target. Incoming economic data, it said, remains broadly consistent with its prior inflation outlook.

Given todays exceptional uncertainty, the ECB affirmed it would reassess economic and financial conditions at each meeting to determine the appropriate monetary stance.

Christine Lagarde

ECB President Christine Lagarde stated on Thursday: Following todays meeting, we can say we are in a wait-and-see mode. She added that the eurozone economy has shown resilience despite global economic uncertainty.

Lagarde stressed that the ECBs decisions are data-dependent and reaffirmed the commitment to achieving the 2% inflation target over the medium term. She also reiterated that the bank will follow a meeting-by-meeting approach with no preset interest rate path.

September Rate Expectations

According to Reuters sources, a clear majority within the ECB favored keeping rates unchanged again in September marking a second consecutive pause.

Money market pricing for a 25-basis-point ECB rate cut in September has dropped from 50% to below 30%.