Premium Watchlist Recap: ECB Monetary Policy Statement (September 2025)

The European Central Bank delivered exactly what markets expected in their September decision – rates unchanged at 2.00%, marking the second consecutive pause after eight cuts.

While the decision itself was no surprise, the nuanced messaging and shifting market dynamics created an interesting environment for our EUR watchlist pairs.

Let’s examine which setups from our watchlist capitalized on the ECB’s steady hand and how they performed against a backdrop of weakening U.S. data and evolving risk sentiment.

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The Setup

• What We Were Watching: ECB Monetary Policy Statement for September 2025
• The Expectation: ECB to maintain main refinancing rate at 2.15%
• Data outcome: ECB held all rates steady as expected, with President Lagarde declaring the “disinflationary process is over” and risks now “more balanced”
• Market environment surrounding the event: Positive risk sentiment driven by weak U.S. jobless claims cementing Fed rate cut expectations; U.S. 10-year yields breaking below 4.00%

Event Outcome

The ECB delivered on expectations, keeping rates unchanged across the board while providing hawkish undertones that caught some traders off guard. Key takeaways from the decision:

• Unanimous decision to hold rates steady at 2.00% (deposit), 2.15% (main refinancing), 2.40% (marginal lending)
• Lagarde: “The disinflationary process is over” – a notably confident statement
• Growth risks characterized as “more balanced” with trade uncertainty “clearly diminished”
• 2025 inflation forecast raised to 2.1% from 2.0%, though 2027 cut to 1.9%
• Data-dependent approach maintained with no pre-commitment to future rate path

The statement reflected growing confidence in the Euro Area’s economic trajectory, particularly following recent EU-U.S. trade agreements that established a 15% tariff framework.

Fundamental Bias Triggered: Bullish EUR setups

The week’s trading environment was dominated by major themes that fundamentally reshaped currency flows:

Early Week: Labor Market Reality Check

Markets digested Friday’s weak NFP (22k vs 75k expected) while French PM Bayrou lost a confidence vote Monday. China’s exports to the U.S. plunged 33%, underscoring trade war damage. Tuesday’s bombshell: U.S. payroll revisions showed a record -911k adjustment, far exceeding the previous -818k, virtually guaranteeing Fed rate cuts.

Mid-Week: Inflation Surprises and Risk Rally

Wednesday’s unexpected PPI decline (-0.1% vs +0.4% expected) triggered a broad risk rally with equities hitting records. Thursday proved pivotal when jobless claims surged to 263,000 – the highest since October 2021 – despite slightly hotter CPI (2.9% y/y). Markets concluded the Fed would prioritize employment over inflation.

Friday: Reality Check and Positioning

UK data delivered a stagflation warning with GDP stalling at 0% and household inflation expectations jumping to a two-year high of 3.6%. This weighed on sterling while reminding markets of global growth challenges. Trump’s threats of Russia sanctions and pressure for 100% tariffs on Russian oil buyers added late-week geopolitical tension, providing dollar support.

Gold hit fresh records above $3,685 before profit-taking emerged. Oil rallied early then struggled late in the week, with WTI ending under $63/bbl as OPEC+’s minimal 137k bpd increase failed to offset demand concerns. Treasury yields responded dramatically to the week’s data, with the 10-year breaking below 4.00% for the first time since April, creating a supportive backdrop for risk assets.

Bitcoin ended the week as the best performing asset among the major financial assets, most likely drawing in fundamental bulls after the Nasdaq announced efforts to tokenize securities earlier in the week.

EUR/CHF: Net Bullish EUR Event outcome + Risk-On Scenario = Arguably good odds of a net positive outcome

EUR/CHF 1-hour Forex Chart by TradingView

The pair entered the ECB decision just under the .9350 minor psychological handle, then briefly popped higher and reversed back lower after the ECB event.

The pullback after the pop was likely some profit-taking immediately after Lagarde’s press conference, possibly from traders who had positioned for a more dovish tilt from the ECB. The pullback tested the targeted S1 pivot / range support area previously discussed, where we saw a swift reversal, likely technical traders and those playing the broad risk-on environment.

The pair managed to bounce toward the 0.9350 mid-range area as anticipated, though it never gained additional momentum, likely due to diverging public commentary among ECB members on where interest rates may go next.  It never came close to testing the 0.9400 range resistance zone that we thought it may see if the broad risk environment was net bullish to risk assets.

Not Eligible to move beyond Watchlist – Bearish EUR Setups and EUR/GBP Long Setup

EUR/GBP: Net Bullish EUR Event outcome + Risk-Off Scenario

EUR/GBP 1-hour Forex Chart by TradingView

After our original discussion, declined significantly to break past our original target technical area of interest, and found support around the confluence of the previous swing low and S1 Pivot support area (roughly 0.8630 – 0.8640).

Surrounding the ECB event, we determined the broad market environment to arguably be risk-on, therefore invalidating EUR/GBP from moving beyond the Watchlist stage, but post-ECB event, the pair did manage to provide a couple of bullish day trade opportunities from that strong technical support area that formed ahead of the event.

EUR/JPY: Net Bearish EUR Event Outcome + Risk-On Scenario

EUR/JPY 1-hour Forex Chart by TradingView

This Watchlist setup was invalidated by the ECB’s slightly more hawkish stance than expected, as Lagarde’s remarks appeared to be hinting at an end to their easing cycle soon.

EUR/JPY had gapped higher over the weekend on Japanese political uncertainty, but the gains were soon faded and the gap was filled as the announcement of a full-scale LDP presidential election resulted to more hawkish BOJ expectations. This prompted EUR/JPY to fall well ahead of the ECB event.

In our original discussion, we actually looked for this behavior, after which we expected EUR/JPY to possibly rally after a pullback. The target area of interest was the confluence of Fibs and moving averages (172.50 – 173.00), which is where EUR/JPY actually stabilized ahead of the ECB event.

These developments turned EUR/JPY into a “Net Bullish EUR Event outcome + Risk-On Scenario” setup, and for those who saw that and played EUR/JPY to the long side post ECB event, likely saw the best net positive outcome for euro players as risk-on sentiment remained strong and yen sentiment soured at the end of the week.

EUR/NZD: Net Bearish EUR Event outcome + Risk-Off Scenario 

EUR/NZD 1-hour Forex Chart by TradingView

Similar to EUR/JPY, we were looking for a post ECB event pullback (if ECB is neutral-to-dovish) into a potential swing long setup in EUR/NZD around the technical arguments of rising moving averages and Fibonacci retracement confluence (1.9640 – 1.9720 area) on the 4 hour timeframe.

While EUR/NZD did fall into our target technical area of interest post ECB and the ECB event outcome supported a long euro bias, with the broad risk environment strongly bullish (Fed rate cut expectations rise) and a strong performance in NZD for the week, taking a long swing bias appears to be a low quality setup at this time.

The Verdict

The ECB’s data-dependent stance and hawkish-leaning messaging provided support for bullish EUR opportunities, with EUR/CHF delivering as our most reliable setup for the week among our original discussions. The technical support zone highlighted at 0.9320 held beautifully before the release, and once again after. Unfortunately, there was no significant follow through to the upside, as there were diverging views from ECB members on interest rate expectations at the end of the week.

Overall, we think the strategy would have likely supported a net positive outcome if played exactly at the technical area of interest marked in the original discussion. But the degree of success was limited due to the late week uncertainty in rate outlook sparked by ECB members, so we rated this discussion as “neutral-likely” supportive of a net positive outcome.

Key Takeaways: