ESTOX price braces for the ECB meeting

What are markets expecting from the ECB meeting?

Investors are closely watching the European Central Bank (ECB) meeting on March 6, where a 25-basis-point interest rate cut to 2.5% is widely anticipated. Since mid-last year, the ECB has reduced rates by a total of 125 basis points, and some sources from the ECB expect that the board aims to lower rates to neutral levels, estimated between 2.25% and 1.75%. This reflects growing concerns among policymakers about sluggish economic growth, which may take precedence over inflation, even as it slightly deviates from the 2% target.

Markets have fully priced in the expected 25-basis-point cut and are now factoring in a greater than 50% probability of a second cut in April. However, investors will likely require further economic data before fully committing to additional rate cuts.

European Central Bank press conference

Investors will seek further guidance from ECB President Christine Lagarde’s press conference, particularly regarding her characterisation of current monetary policy as “restrictive.” If she signals a potential shift in this stance, it could pave the way for pausing further rate cuts.

Recent inflation data complicates the ECB’s decision as the YoY headline inflation rose from 2.3% in January to 2.4% in February, while the YoY core inflation increased from 2.5% to 2.6%. These figures may lead some ECB policymakers to reconsider further rate reductions in the second quarter.

What are investors focusing on now?

While ECB monetary policy remains a key driver of market sentiment, other macroeconomic factors are also in focus—particularly the risk of a tariff war between the Trump administration and the European Commission. Such a conflict could negatively impact economic growth while simultaneously pushing inflation higher in both economies.

President Trump has signalled serious intent to impose tariffs, stating that previously suspended tariffs on Mexico and Canada could soon take effect. Additionally, his administration has already implemented a 10% tariff on China and is considering an additional 10%, adding to global trade uncertainties.

ESTOX Index price action

On March 3, the European stock index surged to an all-time high of 5,566 before retreating on profit-taking. Currently, the index appears poised to test the high end of its trading zone, which lies between 5,313 and 5,600. A daily close above this level suggests a strong bullish momentum, potentially driving prices toward the 5,700 mark.

Key levels to watch in a bearish scenario

Conversely, a daily close below the low end of the mentioned trading zone of 5,313 would signal weakening bullish momentum, increasing the likelihood of a correction toward 5,120.

ESTOX price – Daily Chart

Chart Source: ADSS Platform