Insights 
VT 
François Villeroy, from the European Central Bank, discussed the resilience of the French and Euro-Area economies. He noted that the effect of US tariffs on Eurozone inflation should be minimal, and future rate moves are more likely to result in cuts than hikes.
Villeroy expressed no concerns about the Bank of France or ECB’s independence. He pointed out more risks of inflation decreasing than increasing, and emphasised the importance of adhering to international law concerning Russian assets.
Euro Performance Against Currencies
The Euro showed varied performance against major currencies. The Euro strengthened by 0.73% against the Australian Dollar, and was 0.35% stronger against the US Dollar, but slightly weaker against the Swiss Franc by 0.03%.
Additional insights discuss other international financial topics, including potential inflation changes in Australia and trade tensions influencing USD/JPY rates. Commentary on broker ratings for 2025 provides guidance for trading currencies, particularly the Euro and Gold.
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ECB’s Potential Policy Shift
The European Central Bank is clearly signaling that its next interest rate move is more likely a cut than a hike. We hear a top official state that inflation risks are skewed to the downside, which strongly suggests a more dovish policy ahead. This positions the ECB to potentially begin an easing cycle before other major central banks.
This dovish stance aligns with recent data we’ve seen. The latest Eurostat flash estimate for September 2025 showed headline inflation unexpectedly fell to 1.9%, just below the ECB’s target. Furthermore, preliminary Q3 GDP figures pointed to a slight economic slowdown, giving the bank more justification to lower rates.
In contrast, recent inflation data in the US has remained stubborn, with the last core reading holding firm at 2.8%, keeping the Federal Reserve on a more cautious path. This growing policy divergence makes derivative strategies like buying EUR/USD put options attractive. Such positions allow traders to speculate on a falling exchange rate as interest rate differentials are expected to widen in favor of the dollar.
Looking back, we remember the aggressive and coordinated rate hikes by global central banks throughout 2022 and 2023. The ECB’s potential pivot away from this stance marks a significant regime change. Given this, we should pay close attention to options pricing, as implied volatility on the Euro may not yet fully reflect the risk of a definitive rate cut in the coming months.
