• The European Central Bank’s June 4th meeting is shaping up to be one of the most pivotal in recent memory, according to Dutch central bank governor Klaas Knot.
• He warns of a “really complex” policy environment, as the ECB must weigh immediate disinflationary effects of U.S. tariffs against medium- to long-term inflation uncertainty.
• Trump’s trade policies are triggering a demand shock, which is expected to cool short-term inflation — supporting the argument for another 25 bps rate cut (which would be the ECB’s 8th in the current cycle).
• However, inflation risks are no longer one-directional: supply chain reconfiguration, commodity price shifts, and wage dynamics could reignite upward pressure.

      EUR/USD Outlook:

• The euro has already come under pressure in recent sessions, trading near 1.0650, as markets increasingly price in a dovish ECB tone.
• A June rate cut could further weaken the euro, especially if paired with continued resilience in U.S. economic data and a hawkish Fed stance.
• But… if the ECB signals a “one and done” cut with growing confidence in price stability, the EUR/USD could stabilize — or even rebound modestly from oversold levels.
• Markets will also closely watch: — The ECB’s updated staff projections — Commentary on core inflation — Reaction to U.S. fiscal and tariff-driven uncertainty

       What’s Next?

• The ECB is walking a tightrope — balancing recessionary signals from trade tensions with lingering inflation threats.
• June’s meeting won’t just be about rate cuts; it’s about maintaining credibility while navigating one of the most uncertain global macro backdrops in years.