The EUR/USD currency pair is currently trading within a narrow range around 1.0400, influenced by reduced trading activity during this holiday week. The combination of Christmas and Boxing Day festivities has resulted in lower volumes across the foreign exchange markets, limiting volatility in price movements. Despite this, sentiment remains bearish towards the EURO , which sustained slight losses on Monday following comments from the President of the European Central Bank (ECB) regarding inflation.
Christine Lagarde expressed optimism about inflation levels returning to the ECB’s goal of 2%, indicating that the central bank is nearing a declaration that this target has been sustainably achieved. Nonetheless, she cautioned that inflation within the services sector remains elevated, with current rates at 3.9%, despite a general decline in overall Eurozone inflation to 2.2%. Additionally, Lagarde advised against retaliation to potential trade tariffs imposed by the U.S., suggesting that such actions could have detrimental effects on global economic stability.
In light of future monetary policy, expectations have shifted slightly, with ongoing speculation that the ECB may implement one or more interest rate cuts in the coming meetings as inflationary pressures are anticipated to ease. Traders are currently pricing in a potential 25 basis point reduction in the ECB’s Deposit Facility rate over the next four policy sessions.
In the United States, the dollar has shown stability with the Dollar Index maintaining its position above 108.00. The Federal Reserve has indicated a revised outlook on interest rate cuts, projecting two reductions for 2025 rather than the previously suggested four. As the economic landscape evolves, upcoming U.S. Initial Jobless Claims data will be closely monitored, with expectations that claims will decrease slightly from previous figures.
From a technical perspective, EUR/USD is holding steady above its two-year low at 1.0330. With a bearish outlook supported by declining Exponential Moving Averages, there is potential for further declines towards 1.0200, while resistance will be marked at around 1.0500.
