- EUR/USD inches lower with expectations of the ECB maintaining current interest rates at Thursday’s meeting.
- Fed Governor Christopher Waller stated that the US central bank is ‘getting closer’ to a rate cut.
- Firm Fed rate-cut prospects have weighed on the US Dollar.
EUR/USD depreciates in Thursday’s European session after rallying to a fresh four-month high near 1.0950 on Wednesday. The major currency pair is expected to remain quiet as investors shift to the sidelines ahead of the European Central Bank (ECB) policy meeting, which will be announced at 12:15 GMT.
The ECB is expected to leave its key rates unchanged this time as officials have been refraining from committing a pre-defined rate-cut path amid concerns over sticky inflation in the service sector, which could reverse the disinflation process. Therefore, investors will look for cues about when the ECB cuts interest rates further.
ECB President Christine Lagarde may not provide a specified rate-cut path and will emphasize the need for more data to gain confidence that the disinflation process will not stall before loosening policy further.
The ECB delivered its first rate cut in June after maintaining a restrictive interest rate framework for two years to tame hot inflationary pressures driven by coronavirus-pandemic-led stimulus. The reasoning behind unwinding the tight policy stance was the firm confidence of officials that risks to inflation and the economy are finely balanced and price pressures will return to the desired rate of 2%.
Currently, financial markets expect that the ECB will deliver two more rate cuts this year. The ECB is also expected to deliver its next rate-cut move in September.
Daily Digest Market Movers: EUR/USD turns sideways while US Dollar remains fragile
- Recent inflation figures have also boosted the confidence of policymakers that inflation will return to the path of 2% target. On Wednesday, Fed Governor Christopher Waller communicated confidence over moderation in the job market and inflation. When asked about rate cuts, Waller said, “I do believe we are getting closer to the time when a cut in the policy rate is warranted,” Reuters reported.
- EUR/USD consolidates near 1.0950 ahead of the ECB policy outcome. The near-term outlook of the shared currency pair remains firm as the US Dollar (USD) remains vulnerable. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, seems fragile near a more than three-month low at 103.70.
- The US Dollar could see more downside amid firm speculation that the Federal Reserve (Fed) will start reducing interest rates from the September meeting. Upbeat expectations for Fed rate cuts have been prompted by easing price pressures and cooling labor market conditions. June’s Consumer Price Index (CPI) report showed that annual headline and core inflationary pressures decelerated at a faster-than-expected pace.
- Fed’s Beige Book, released on Wednesday, showed that firms witnessed moderate growth and slower labor demand from late May through early July. Recent employment data also showed that the Unemployment Rate rose to 4.1%, the highest since December 2021.
Technical Analysis: EUR/USD stays above 1.0900
EUR/USD trades sideways around 1.0950, inside Wednesday’s trading range ahead of the ECB policy meeting. The major currency pair remains firm after a breakout of the Symmetrical Triangle formation on a daily timeframe. A breakout of the above-mentioned chart pattern results in wider ticks and heavy volume.
The near-term outlook of the major currency pair is bullish as the 20-day Exponential Moving Average (EMA) near 1.0816 is sloping higher.
The 14-day Relative Strength Index (RSI) shifts into the bullish range of 60.00-80.00, suggesting a strong upside momentum.
The shared currency pair is expected to extend its upside towards March 8 high near 1.0980. On the contrary, a downside move below the round-level support of 1.0800 could weaken the pair.
Euro PRICE Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the weakest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.08% | 0.17% | 0.14% | -0.05% | -0.09% | 0.19% | 0.07% | |
| EUR | -0.08% | 0.09% | 0.05% | -0.13% | -0.17% | 0.11% | -0.01% | |
| GBP | -0.17% | -0.09% | -0.04% | -0.23% | -0.25% | 0.04% | -0.09% | |
| JPY | -0.14% | -0.05% | 0.04% | -0.19% | -0.21% | 0.04% | -0.05% | |
| CAD | 0.05% | 0.13% | 0.23% | 0.19% | -0.03% | 0.25% | 0.13% | |
| AUD | 0.09% | 0.17% | 0.25% | 0.21% | 0.03% | 0.29% | 0.19% | |
| NZD | -0.19% | -0.11% | -0.04% | -0.04% | -0.25% | -0.29% | -0.12% | |
| CHF | -0.07% | 0.01% | 0.09% | 0.05% | -0.13% | -0.19% | 0.12% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
Economic Indicator
ECB Main Refinancing Operations Rate
One of the three key interest rates set by the European Central Bank (ECB), the main refinancing operations rate is the interest rate the ECB charges to banks for one-week long loans. It is announced by the European Central Bank at its eight scheduled annual meetings. If the ECB expects inflation to rise, it will increase its interest rates to bring it back down to its 2% target. This tends to be bullish for the Euro (EUR), since it attracts more foreign capital inflows. Likewise, if the ECB sees inflation falling it may cut the main refinancing operations rate to encourage banks to borrow and lend more, in the hope of driving economic growth. This tends to weaken the Euro as it reduces its attractiveness as a place for investors to park capital.
Next release: Thu Jul 18, 2024 12:15
Frequency: Irregular
Consensus: 4.25%
Previous: 4.25%
Source: European Central Bank
