The ECB has executed eight straight rate cuts since June 2024, driving its key deposit rate from about 4% to around 2% by mid‑2025. On July 24, 2025, it paused at 2%, citing trade-related uncertainty – especially persistent U.S.–EU tariff tensions – and stable inflation at target levels. While markets had factored in a further cut as early as September, the bar for additional easing is now high, with many economists projecting only one more cut by year‑end, possibly as late as December.
Sources: Reuters ECB, Reuters Upbeat
The ECB’s cumulative easing – eight consecutive rate cuts since June 2024 – initially weighed on the euro, driving EUR/USD below 1.14 in early summer 2025. However, despite the latest cut, the move was widely seen as fully priced in. The pair managed to stabilize and even logged modest post-meeting gains, supported in part by ECB President Christine Lagarde’s comments highlighting steady growth prospects and persistent trade-related risks.
Options market dynamics reinforce this cautious optimism but underscore ongoing downside risks. There’s been a sharp tilt toward USD puts over calls, with risk-reversal skews hovering near multi-year highs – signaling continued bearish sentiment around EUR/USD. At the same time, CFTC data shows non-commercial net long positions in EUR/USD have risen to over 128,000 contracts – the highest level since December 2023. While this points to increased bullish positioning, it also introduces vulnerability: if broader sentiment shifts, the potential for a rapid unwind grows. That said, ING analysts note that net longs still represent only around 15.6% of total open interest, suggesting that speculative positioning remains relatively moderate and not yet overstretched. As highlighted by TradingPlatforms.co.uk, this dynamic illustrates how fragile market sentiment remains even amid stronger positioning.
While EUR/USD is still the go-to barometer for shifts in ECB policy, traders are increasingly watching EUR/CHF and EUR/SEK for clues. These currency pairs have become hotspots for those looking to tap into diverging central bank paths and shifting capital flows.
Take EUR/CHF, for example – it’s slipped to around 0.93 as of late July 2025. That drop reflects a stronger Swiss franc, boosted by persistent safe-haven demand and a broader risk-off mood in markets. Adding to the story, sight deposits at the SNB have jumped to their highest level since April 2024. That’s fueling speculation that the central bank might step in to rein in the franc’s rise.
The SNB cut its policy rate to 0% in June 2025 and remains cautious, with inflation hovering near 0% year-on-year as of April – leaving the door open to further easing. In contrast to the ECB’s aggressive cuts, this has helped widen the real yield gap in favor of the franc. The 2-year yield spread continues to support Switzerland, drawing in carry flows that keep pressure on EUR/CHF.
Sources: MarketPulse, Ibani
EUR/SEK has climbed steadily since May, reflecting a weaker Swedish krona as markets adjust their expectations around monetary policy. The Riksbank cut its key rate from 2.25% to 2.00% in mid‑June 2025 but signaled that further easing isn’t a given and would depend on upcoming data – messaging that reinforced a slightly hawkish short-term stance. Inflation in June came in hotter than expected, with headline CPIF at 2.9% year-on-year and the core rate (excluding energy) at 3.3%, both well above the 2% target. The upside surprise has increased pressure on the central bank to hold rates steady, despite earlier suggestions that another cut might still be on the table for 2025.
At the same time the Swedish krona found support amid shifting expectations. ECB reference rates show the pair moved from around 10.87 in late May to roughly 11.18–11.19 by July 24, 2025, as reduced euro inflows and firmer krona sentiment shaped the cross.
Sources: Reuters Swedish, Reuters Inflation, ECB
With the ECB on pause and further cuts likely delayed until year-end, euro traders are shifting focus to cross plays like EUR/CHF and EUR/SEK. Options skew shows increased hedging against euro weakness in these pairs, reflecting divergence-driven volatility. Tactical setups beyond EUR/USD may offer more opportunities in the second half.