ECB Raises Rates by 0.25%, First Hike in 2 Years and 9 Months; Euro Buying and Yen Selling May Be Curbed

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The European Central Bank decided on the 11th to raise its policy interest rate by 0.25 percentage points. This is the first rate hike in two years and nine months, since September 2023. The euro-dollar pair was bought up to 1.2349 dollars before falling to 0.9536, but against the backdrop of US rate cuts and waning confidence in dollar-denominated assets, it has recovered to 1.2081 dollars toward January 2026. Meanwhile, the euro-yen pair fell to 114.43 yen before rising gradually, and has been bought up to 187.70 yen amid the ongoing yen weakness and dollar strength and expectations for an end to the war in Ukraine. However, the Bank of Japan decided at its June monetary policy meeting to raise rates from 0.75% to 1.0%, so risk-on euro buying and yen selling may be somewhat restrained.

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ECB raised its policy rate by 0.25pp, its first hike in nearly three years, lifting the ECB policy rate/yield.

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