ECBThe ECB raised all three key interest rates by 25 basis points at its 11 June Governing Council meeting — the first hike since September 2023 — citing inflationary pressures generated by the US–Iran war. The deposit facility rate moves to 2.25%, the main refinancing rate to 2.40%, and the marginal lending facility to 2.65%, effective 17 June. The decision was unanimous. The ECB now forecasts eurozone headline inflation averaging 3.0% in 2026, 2.3% in 2027, and 2.0% in 2028, while cutting the growth outlook to 0.9% for 2026, 1.3% for 2027, and 1.4% for 2028.
ECBECB President Lagarde declined to pre-commit to a July rate move at the post-meeting press conference but market pricing already reflects a further hike. She stated: 'The outlook remains uncertain, with upside risks for inflation and downside risks for economic growth.' The German 10-year Bund yield rose 8.6 basis points to 3.00% on Friday, consistent with markets recalibrating the ECB terminal rate higher following the hike. Lagarde is scheduled to speak again at 08:30 CET this morning; any commentary on the impact of the Iran peace deal on the ECB's inflation and rate path assessments will be closely watched.
BANKSEuropean financials were the standout sector on Friday, with the Banks sector ETF (EXV1.DE) surging 4.31% and Insurance (EXV9.DE) adding 4.29% — the two best-performing sectors in Europe. Deutsche Bank (DBK.DE) led the Euro Stoxx 50 gainers with a 6.60% advance, while Banco Santander (SAN.MC) rose 5.29% and BNP Paribas added over 5%. The move reflects improved credit and macro confidence alongside the ECB's rate hike, which supports net interest margins across the eurozone banking sector.
ENERGYEuropean energy majors were among the few decliners on Friday, with ENI (ENI.MI) falling 2.25% and TotalEnergies (TTE.PA) dropping 2.08% as crude prices fell sharply on peace deal optimism. The Oil & Gas sector ETF (EXH2.DE) still managed a 2.61% gain on the day, reflecting the broader market rally carrying most names higher. With WTI potentially settling near $80/bbl on deal confirmation, upstream revenue assumptions for European integrated majors will need to be reassessed, and TTF gas at €44.34/MWh also impacts their European gas trading divisions.
MACROThe ECB modelled a severe energy stress scenario in which, relative to baseline, oil prices could rise 60% and gas prices could double to approximately $166/barrel and €98/MWh respectively in Q3 2026. With the Iran deal materialising and Hormuz set to reopen within 30 days, this adverse scenario appears to be receding, which has implications for ECB inflation forecasts published last week — specifically whether the 3.0% 2026 headline forecast now carries downside risk that could influence the July rate decision.
MACROThe EU announced on 9 June that it would mobilise up to €25 billion for renewable energy and clean technology by 2035 through the Pact for the Mediterranean initiative. Separately, Germany's industrial production MoM figure for April is released at 22:00 CET tonight, with consensus at +0.4% against a prior reading of -0.1%, alongside German trade data expected to show a €15 billion surplus. These figures will offer the first hard-data read on how Germany's manufacturing sector performed amid the energy shock before any peace dividend is felt.