In June, the ZEW Economic Sentiment Index showed a significant increase, rising by 20.7 points to a level of +10.5 points. However, the assessment of the current economic situation in Germany showed a slight deterioration: the corresponding indicator dropped by 3.2 points compared to the previous month, reaching -81 points.

The main driver of the positive expectations was the assumption that the conflict between the US and Iran would soon come to an end. It is expected that this will lead to a decrease in inflationary pressure and, as a consequence, stimulate domestic demand. The forecast for the eurozone as a whole also improved significantly, showing an increase of 18.6 points compared to May. Nevertheless, the current assessment of the economic situation in the region remains negative (-43.4 points), having changed little since last month.

The central bank emphasized that this decision was "justified considering various scenarios of developments and their impact on the medium-term prospects of the eurozone." European Central Bank President Christine Lagarde stated that the decision was unanimous and that no other alternatives were discussed.

Despite the downward revision of growth forecasts, ECB staff remain confident in the prospects of the eurozone economy. Only a slight slowdown in growth rates is expected in the current and next year compared to the March forecasts. Meanwhile, the forecast for core inflation has been revised upwards across the entire forecast horizon, confirming the need for further tightening of monetary policy.

The ECB's confident position suggests that at the next meeting in June, the rate will be raised again by 25 basis points, potentially reaching 3% by the end of the year. The realization of such a scenario could contribute to the strengthening of the euro. However, the key factor remains "if," as sustainable growth requires stabilization of the economic situation, particularly a clear outlook for the recovery of energy supplies. While the memorandum between the US and Iran provides grounds for optimism, it is insufficient to fully overcome the period of instability. Clarity on this issue is still lacking.

Speculative positioning on the euro has deteriorated over the reporting week by $5.1 billion, but the calculated price still maintains an upward momentum, which gives grounds to expect continued corrective growth.

As we anticipated a week ago, the euro reacted positively to the results of the ECB meeting. We proceed from the assumption that the current positive sentiment still prevails, and the euro may rise further to the resistance zone of 1.1670/90; however, there are still few reasons for long-term growth. Accordingly, we consider the current rise to be corrective, which will not last long before the euro returns to a bearish trajectory.