On Wednesday, the EURO was calm after a massive 3-day rally which resulted in the EUR/USD jumping 1.4%. EUR/USD traded at about 1.1220, down 0.08% for the day in the European session.
The ECB cut interest rates in June for the first time since 2019. This took the key rate down from a record 4% to 3.75%. The ECB also revised its inflation forecast for 2024 to 2.5% from 2.3% at the meeting.
The ECB is still worried about persistent inflation which is higher than the target of 2%. This won’t stop the central bank from making more cuts as rate moves normally take time to filter through the economy.
Although the ECB wants to continue trimming rates to boost a flagging economy in the eurozone, strong wage growth and sticky inflation are making it more difficult to cut rates. The markets have priced in an about 90% chance of a rate cut at the Sept. 12 meeting.
The yearly meeting at Jackson Hole may be dramatic. On Friday, Federal Reserve Chair Powell will address the gathering before a generally expected Fed rate cut in Sept.
