- EUR/USD backslides as ECB headlines stoke ECB rate cut bets.
- Europe sees GDP figures on Wednesday ahead of US Fed rate call.
- Markets bet on ECB rate cut in April.
EUR/USD fell to its lowest bids since mid-December, testing the 1.0800 handle after European Central Bank (ECB) officials left the doors wide open for rate cuts much earlier than investors had previously anticipated.
Europe delivers a round of Gross Domestic Product (GDP) figures on Tuesday, headlined by pan-European GDP growth for the fourth quarter at 10:00 GMT. The US Federal Reserve’s (Fed) latest rate call is slated for Wednesday, to be followed by a Federal Open Market Committee (FOMC) press conference half an hour after the Fed’s monetary policy statement.
Daily digest market movers: EUR/USD sheds weight after ECB officials spark early rate cut hopes
- EUR/USD slipped further back on Monday after ECB board member and Banco de Portugal Governor Mário Centeno sparked rate cut hopes.
- ECB’s Centeno suggested the ECB should cut rates sooner rather than later to head off the possibility of European inflation declining too far below the ECB’s 2% target.
- ECB Centeno shrugged off the idea of the ECB waiting for first-quarter wage growth figures before punching the rate cut button, claiming there are no second-round inflation effects of wage increases.
- ECB board member Centeno is not in the ECB Governing Council vote rotation until March.
- Money markets have fully priced in a first rate trim from the ECB of 25 basis points in April.
- Rate swaps expect 149 basis points in ECB rate cuts through the end of the year.
- ECB policymaker and Slovakian central bank chief Peter Kazimir quickly followed Centeno, stating that a June rate cut is far more likely than April.
- ECB’s Kazimir pulled in the reins, claiming that rate cut talk remains ‘premature’, but agreed the top of the rate hike cycle has peaked and the ECB’s next move will be a cut, but only when appropriate.
- ECB Vice-President Luis de Guindos followed up by agreeing that inflationary risks are on the downside but reiterated that the ECB’s policies will reflect available data.
- Fed Chairman Jerome Powell is expected to deliver language on Wednesday that corroborates money market bets of a benchmark rate cut in May.
- Rate swaps are pricing in nearly a 90% chance of at least 25 basis points off the top from the Fed before June.
Euro price today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the weakest against the Japanese Yen.
USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
USD | 0.26% | 0.08% | -0.07% | -0.22% | -0.36% | -0.24% | -0.12% | |
EUR | -0.24% | -0.16% | -0.31% | -0.46% | -0.58% | -0.48% | -0.36% | |
GBP | -0.09% | 0.18% | -0.16% | -0.32% | -0.42% | -0.34% | -0.19% | |
CAD | 0.08% | 0.32% | 0.15% | -0.16% | -0.27% | -0.18% | -0.04% | |
AUD | 0.23% | 0.49% | 0.31% | 0.16% | -0.11% | 0.00% | 0.11% | |
JPY | 0.34% | 0.60% | 0.56% | 0.26% | 0.08% | 0.07% | 0.23% | |
NZD | 0.27% | 0.51% | 0.35% | 0.18% | 0.02% | -0.10% | 0.17% | |
CHF | 0.11% | 0.37% | 0.19% | 0.04% | -0.11% | -0.23% | -0.12% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Technical Analysis: EUR/USD tests low-side barriers, resistance zones piling up above 1.0850
Monday saw EUR/USD decline over eight-tenths of a percent peak-to-trough from Friday’s near-term peak at 1.0886, and the pair continues to waffle below the 200-hour Simple Moving Average (SMA) descending into 1.0870.
Technical resistance has piled up in a familiar zone just below the 1.0900 handle, capping off intraday momentum to the top side and chaining EUR/USD into a defensive position as bids test old chart territory.
Daily candlesticks show the way open for a bearish test into December’s swing lows near 1.0750 as price action churns into the low side of the 200-day SMA near 1.0850. The pair’s ongoing pattern of higher lows is set for a challenge if buyers aren’t able to prop the pair back up over the 50-day SMA near 1.0925.
EUR/USD Hourly Chart
EUR/USD Daily Chart![](https://i0.wp.com/editorial.fxstreet.com/miscelaneous/EUR_USD-638421474859031585.png?w=788&ssl=1)
ECB FAQs
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region.
The ECB primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Euro and vice versa.
The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
In extreme situations, the European Central Bank can enact a policy tool called Quantitative Easing. QE is the process by which the ECB prints Euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually results in a weaker Euro.
QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The ECB used it during the Great Financial Crisis in 2009-11, in 2015 when inflation remained stubbornly low, as well as during the covid pandemic.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the European Central Bank (ECB) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the ECB stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Euro.
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