ECB keeps door open to September rate cut, but 'nothing predetermined'

Euro area monetary policy makers kept rates unchanged on Thursday while keeping the door open to a possible rate cut in September.

But its bias appeared to be one of caution.

In its policy announcement, the ECB said: "While some measures of [underlying inflation] ticked up in May owing to one-off factors, most measures were either stable or edged down in June."

"High" wage growth was offset by profits and financing conditions were restrictive, it said.

Domestic pressures on the other hand were described as "high", services inflation elevated and headline inflation was "likely" to still be above target "well into next year".

However, in her press conference, ECB boss, Christine Lagarde, said that a rate cut in September was possible, but was careful to add that nothing was pre-determined.

Heading into the ECB's meeting, some market commentary held that the euro area monetary authority would not want to get too far ahead of its peers in the US.

And many analysts were of the opinion that an election victory for Donald Trump in the US would be dollar "positive".

Citi analysts were of that opinion too, but noted recent remarks from Trump which might indicate otherwise.

"We reiterate why we think the election will be USD positive in our latest FX Forecasts; however, we recognize Trump comments in a recent interview imply a desire for a weaker USD. Despite that, we still think Trump trade is for a stronger USD, and outline timing and levels to watch below."

On Thursday, the ECB maintained its main refinancing rate at 4.25%, that on the marginal lending facility at 4.50% and that on the deposit facility at 3.75%.