The European Central Bank (ECB) announced a mini interest rate hike without providing adequate guidance for future policies.

The European Central Bank (ECB) announced a modest 25 basis points increase in interest rates after its Thursday (May 4) meeting without providing adequate clues for further policy changes. As a result, the EUR/USD pair once again failed to break through the 1.1100 thresholds.

eurusdEUR/USD Daily chart via TradingView

Previously, market participants' expectations were split between a projected 50 or 25 basis point rate hike for the ECB policy meeting today. Unfortunately, the ECB ultimately chose the smaller-scale rate hike. The ECB's deposit rate increased from 3.00% to 3.25%, and the marginal lending facility increased from 3.75% to 4.00%.

The market was also disappointed that the central bank did not provide any commitment to further rate hikes. The ECB only stated that future interest rate changes depend on economic data and inflation expectations.

"The Governing Council will continue to follow a data-based approach in determining the appropriate level and duration of monetary tightening," stated the ECB statement.

The ECB's announcement of a rate hike triggered a decline in the euro in the forex market. Its decline was briefly halted by the press conference held by ECB President Christine Lagarde shortly after the interest rate announcement, but it then continued to fall.

Lagarde emphasized that the ECB will not stop the cycle of rate hikes and will not start cutting rates, as the risk of inflation remains high. She expressed her concern about the impact of rising wage pressures on inflation from now on while also suggesting the need for further rate hikes, but without specifying a particular number for the next rate hike projection.

At the time of writing, EUR/USD was trading around 1.1030. EUR/GBP fell about 0.5% to its lowest level in a month. Meanwhile, EUR/JPY fell 1.0% to its lowest level this week.