The EUR/USD pair has been inching lower in the European session as investors anticipate the European Central Bank (ECB) to maintain current interest rates at Thursday’s meeting. Federal Reserve Governor Christopher Waller also hinted at a potential rate cut in the US, leading to firmer rate-cut prospects that have weighed on the US Dollar.
The ECB is expected to keep its key rates unchanged amid concerns over sticky inflation in the service sector. ECB President Christine Lagarde may not provide a specific rate-cut path but will emphasize the need for more data to support further loosening of policy. Financial markets expect the ECB to deliver two more rate cuts this year, with the next move likely in September.
The recent inflation figures have boosted policymakers’ confidence that inflation will return to the 2% target. The US Dollar remains vulnerable, and the Federal Reserve is expected to begin reducing interest rates from the September meeting. Easing price pressures and cooling labor market conditions have prompted the speculation for Fed rate cuts.
Technical analysis of the EUR/USD pair shows a bullish outlook, with the pair expected to extend its upside towards the March high near 1.0980. On the other hand, a move below the support level of 1.0800 could weaken the pair. The Euro has had mixed performance against major currencies today, with the weakest performance recorded against the Australian Dollar.
One of the key interest rates set by the ECB is the main refinancing operations rate, which is the interest rate charged to banks for one-week loans. Changes in this rate impact the Euro’s attractiveness to foreign investors. The next announcement for this rate is scheduled for Thursday, July 18, 2024.
Overall, the EUR/USD pair remains volatile ahead of the ECB meeting and potential rate cuts from the Federal Reserve. Investors will closely monitor the central banks’ decisions and economic indicators to gauge the direction of both currencies in the coming weeks.
