- EUR/USD consolidates in a range ahead of the crucial ECB monetary policy meeting.
- The ECB is widely expected to cut rates for the fifth consecutive meeting, by 25 bps.
- This marks a divergence in comparison to the Fed’s hawkish pause and favors bears.
The EUR/USD pair struggles to capitalize on the overnight bounce from the 1.0380 area or the weekly low and oscillates in a narrow band during the Asian session on Thursday. Spot prices currently trade around the 1.420 region, nearly unchanged for the day as traders opt to wait on the sidelines ahead of the highly-anticipated European Central Bank (ECB) meeting.
The ECB is widely expected to lower borrowing costs for the fifth straight meeting on the back of persistent low inflation and subdued economic growth in the Eurozone. Moreover, the markets have been pricing in the possibility of three more rate cuts by the end of this year amid concerns over the potential economic fallout from US President Donald Trump’s threatened trade tariffs. This, in turn, is seen acting as a headwind for the shared currency and the EUR/USD pair amid a modest US Dollar (USD) uptick.
Despite Trump's demand for lower interest rates, the US central bank decided to stand pat at the end of a two-day meeting on Wednesday and signaled that there would be no rush to lower borrowing costs until inflation and jobs data made it appropriate. The Fed's hawkish pause acts as a tailwind for the USD and further contributes to capping the EUR/USD pair. That said, a fresh leg down in the US Treasury bond yields keeps a lid on the USD and supports the currency pair heading into the key central bank event risk.
Apart from the crucial ECB decision, traders on Thursday will look to the release of the Advance US Q4 GDP print, which might influence the USD price dynamics and provide some impetus to the EUR/USD pair later during the North American session, Nevertheless, the divergent ECB-Fed policy expectations suggest that the path of least resistance for the EUR/USD pair is to the downside. Hence, any attempted recovery move might still be seen as a selling opportunity and run the risk of fizzling out rather quickly.
Economic Indicator
ECB Rate On Deposit Facility
One of the European Central Bank's three key interest rates, the rate on the deposit facility, is the rate at which banks earn interest when they deposit funds with the ECB. It is announced by the European Central Bank at each of its eight scheduled annual meetings.
Read more.Next release: Thu Jan 30, 2025 13:15
Frequency: Irregular
Consensus: 2.75%
Previous: 3%
Source: European Central Bank
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD stays below 1.0500 after German and EU PMI data
EUR/USD stays on the back foot and trades below 1.0500 in the European session on Friday after the data from Germany and the Eurozone showed that the economic activity in the private sector expanded at a moderate pace in February. Investors await US PMIs.
GBP/USD retreats to 1.2650 area after mixed UK data
GBP/USD struggles to gather bullish momentum and stays near 1.2650 in the European session on Friday. Earlier in the day, the upbeat UK Retail Sales helped Pound Sterling find demand but the mixed PMI reports limited the pair's upside. Focus shifts to key US data releases.
Gold drops over 1% from Thursday’s all-time high
Gold dives lower and slips below $2,925 on Friday. The Trump administration puts lifting trade bans against Russia on the table. Traders are mulling the upcoming US preliminary S&P PMI data for February.
US S&P Global PMIs set to show healthy services and manufacturing sector in February
S&P Global is set to release its early estimates for the US Purchasing Managers Indexes (PMIs) for February this Friday. These PMIs are based on surveys of top private-sector executives and offer a snapshot of the overall economic health.
Money market outlook 2025: Trends and dynamics in the Eurozone, US, and UK
We delve into the world of money market funds. Distinct dynamics are at play in the US, eurozone, and UK. In the US, repo rates are more attractive, and bills are expected to appreciate. It's also worth noting that the Fed might cut rates more than anticipated, similar to the UK. In the eurozone, unsecured rates remain elevated.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.