The EUR/USD currency pair has seen a decrease as the European Central Bank (ECB) is likely to announce a 25 basis point reduction in both the Main Refinancing Operations and the Deposit Facility Rate. This change comes amid a strong performance of the US dollar, which has recently hovered near a two-month peak of 103.35, a level reached on Monday. The Atlanta Federal Reserve President has indicated expectations of just one more interest rate cut of 25 basis points in the year ahead.
After experiencing a four-day decline, the EUR/USD is trading around 1.0890 during the Asian trading session on Wednesday. A potential rate cut from the ECB during its policy meeting on Thursday is anticipated to exert additional downward pressure on the EURO . Investors will be closely examining the upcoming Harmonized Index of Consumer Prices (HICP) data from the Eurozone, as this information may influence trading decisions ahead of the ECB’s announcement.
The ECB’s Monetary Policy Statement, along with President Christine Lagarde’s address during the press conference after the meeting, is expected to provide vital insights into the future direction of the central bank’s monetary policy. In the meantime, the US Dollar Index, which gauges the dollar’s performance against six major currencies, has maintained its robust standing near its recent high. The strong jobs and inflation figures released last week have dampened expectations for aggressive monetary easing by the Federal Reserve next year.
Market participants are currently predicting a total of 125 basis points in rate cuts over the next year. According to market analysis, there is a 94.1% likelihood that the Fed will enact a 25-basis-point rate cut in November, with no expectations for a more significant cut of 50 basis points at this time. The Fed’s outlook appears to suggest a more measured approach as signals from the central bank indicate fewer anticipated cuts than previously projected.
