European Stock Markets Rise Ahead of ECB Decision

European stock markets rose slightly on Thursday, supported by strength in automakers and industrial metal miners, as investors awaited the European Central Bank's monetary policy decision. The STOXX 600 index gained 0.2%, while miners of industrial metals rose 0.6% and automakers repented 0.5%. Investors remained cautious ahead of the ECB meeting, where a 25-basis-point interest rate cut is expected. The uncertainty in trade talks persisted, with US President Donald Trump's deadline for countries to present improved negotiations passing without concrete progress.

European stock markets rose slightly on Thursday, supported by strength in automakers and industrial metal miners, as investors awaited the European Central Bank's monetary policy decision. The STOXX 600 index gained 0.2%, while miners of industrial metals rose 0.6% and automakers repented 0.5%. Investors remained cautious ahead of the ECB meeting, where a 25-basis-point interest rate cut is expected [1].

The uncertainty in trade talks persisted, with US President Donald Trump's deadline for countries to present improved negotiations passing without concrete progress. The Federal Reserve's May monetary policy meeting minutes indicated a hawkish stance, with comments suggesting the risk of inflation persisting longer than expected. However, the probability of a US interest rate cut by the Federal Reserve in July does not exceed 20% [2].

The Eurozone Harmonized Index of Consumer Prices (HICP) fell by 1.9% year-over-year in May, below the ECB’s 2% target. This reinforces expectations that the central bank might cut rates this week [3]. The ECB is widely expected to trim interest rates by 25 basis points, taking its key rate, the deposit facility rate, to 2% [4].

The EUR/USD pair maintains its position as the US Dollar depreciates due to US economic uncertainty. Traders await the US Nonfarm Payrolls (NFP) report for May, which is expected to show 130K job additions. If the report showed a stronger-than-expected outcome, this might lift the Greenback and put downward pressure on the EUR/USD pair [3].

In another context, analysts pointed out that the Federal Reserve's May monetary policy meeting minutes were relatively hawkish, with comments indicating that almost all committee participants noted the risk of inflation persisting longer than expected. Overall, financial markets believe that the probability of a US interest rate cut by the Federal Reserve in July does not exceed 20% [2].

Uncertainty surrounding the economy as a whole will be renewed, and there will also be an impact on budget revenues. The ECB's latest monetary policy meeting is expected to be difficult, with sharp divisions on the board. RBC Capital Markets expects a difficult meeting, stating: "We believe there are sharp divisions on the board, and we would be very surprised if the decision was unanimous" [1].

The European stock market performance and future gains have been influenced by the latest inflation data from the Eurozone's largest economies, with consumer price index figures showing a decline in inflation in Germany, Italy, and Spain. This could give the European Central Bank more room to cut borrowing costs at its upcoming meeting this week [2].

References:
[1] https://www.dailyforex.com/forex-technical-analysis/2025/06/eurusd-analysis-02-june-2025/229051
[2] https://www.thearmchairtrader.com/uk-stock-market-news/vodafone-indivior-megroup/
[3] https://www.cnbc.com/2025/06/05/european-markets-on-thurs-june-5-ecb-rate-cut-stoxx-600-ftse-dax.html
[4] https://www.fxstreet.com/news/eur-usd-hovers-below-11400-as-eurozone-inflation-falls-below-ecbs-2-target-202506040404