empty
25.01.2024 01:48 PM
EUR/USD: Ahead of the ECB meeting

This image is no longer relevant

The markets have quieted down, and investors are in a waiting mode ahead of the publication (at 13:15 GMT) of the ECB's decision on interest rates. Looking ahead, it is widely expected that ECB leaders will not change the parameters of monetary policy and will maintain a cautious stance, leaving interest rates at their previous levels: the key rate at 4.50%, the deposit rate at 4.00%, and the marginal rate at 4.75%.

Eurostat recently reported that the final assessment of December consumer price indices in the Eurozone mostly matched the preliminary data, except for the core CPI. It turned out to be slightly higher than the preliminary estimate (+0.5% versus preliminary +0.4%). Overall, the Eurozone's annual CPI accelerated in December to +2.9% from +2.4% a month earlier (with a forecast of +3.0%), while the annual core CPI slowed down to +3.4% from 3.6% in November (with a forecast of +3.5%).

In turn, the inflation macrostatistics from Germany published last Tuesday also failed to support the euro: December's revised inflation data recorded no changes compared to November's data when the consumer price index was +0.1% (+3.7% on an annual basis).

The producer price index in Germany decreased in December from -0.5% to -1.2% and from -7.9% to -8.6% on an annual basis, exceeding expectations. The German industry remains under pressure from the decline in demand for products and the volume of orders, forcing companies to reduce prices.

Although the data indicates still high inflation in the Eurozone (the ECB's target consumer inflation level is close to 2.0%), there is also a trend of its slowdown (previous annual CPI values: +2.4%, +2.9%, +4.3%, +5.2%, +5.3%, +5.5%, +6.1%, +6.1%, +7.0%, +6.9%, +8.5%, +8.6% (in January 2023), while risks of recession persist.

The continuing slowdown of the overall European economy is also evidenced by the PMIs published on Wednesday. The preliminary PMI in the German manufacturing sector adjusted in January to 45.4 (from 43.3 earlier), the services sector to 47.6 (from 49.3 earlier), and the composite to 47.1 (from 47.4 earlier). The corresponding Eurozone PMI rose to 46.6 (against 44.4 in December and a forecast of 44.8), while in the services sector, it decreased in January to 48.4 (from 48.8 earlier with a forecast of 49.0). All indicators remain below the 50 mark, which separates growth in activity from a slowdown, indicating that business activity in the Eurozone continues to slow down. Economists believe that the downturn may be longer than previously expected.

The deterioration in the business climate was also evidenced by the IFO business climate index published today in Germany, which fell in January to 85.2 (from 86.3 in December with a forecast of 86.7). The index of assessment of current economic conditions was 87.0 (below the December figure of 88.5 and the forecast of 88.6), and the IFO expectations index, reflecting company forecasts for the next six months, fell to 83.5 from 84.8 earlier.

In other words, these data reinforce market expectations regarding today's neutral ECB decision on interest rates. The greatest interest will be in the press conference. It will begin at 13:45 (GMT), and ECB President Christine Lagarde will explain the bank's decision and likely outline near-term plans regarding monetary policy. It's possible that, as early as April or May, the ECB will begin to ease its policy and announce a reduction in the interest rate by 0.25%. If Lagarde speaks of such intentions of the ECB leadership, it is logical to expect a sharp fall in the euro and, consequently, in the EUR/USD pair. Conversely, a tough tone in her speech regarding the central bank's monetary policy will strengthen the euro.

This image is no longer relevant

But these are not all the main events of today's trading day.

Investors will also closely monitor data from the USA: At 13:30 (GMT), statistics on the dynamics of GDP for the 4th quarter of 2023 and the number of jobless claims will be published. The growth of the American economy in the 4th quarter is assumed to be +2.0%. This would give an average annual increase for 2023 in the range of 2.8%–3.0%. Strong U.S. GDP data could increase the likelihood not only of maintaining the Fed's interest rate at high levels for a longer time but also of another increase. However, weaker data could signal the Fed to lower borrowing costs. Most likely, this refers to the first half of this year.

This image is no longer relevant

From a technical point of view, EUR/USD remains to trade in the zone of the medium-term bull market, above the key support level of 1.0805, and in the zone of the long-term bear market, below the key resistance level of 1.1000.

At the same time, technical indicators on the daily and weekly charts of the pair also show mixed dynamics. Thus, the outcome of today's ECB meeting could give the EUR/USD pair a new impulse for movement in either direction – in any.

Jurij Tolin,
Analytical expert of InstaForex
© 2007-2025
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

XAU/USD. Analysis and Forecast

Gold prices are struggling to gain momentum after a moderate intraday rebound from the $3340 level. Traders remain cautious, preferring to await the release of the U.S. Nonfarm Payrolls (NFP)

Irina Yanina 12:21 2025-07-03 UTC+2

EUR/JPY. Analysis and Forecast

consecutive day, once again approaching the yearly high reached earlier this week.The trade agreement between the United States and Vietnam has eased concerns over a prolonged trade conflict, increasing investor

Irina Yanina 12:13 2025-07-03 UTC+2

Good News Will Support Stock Markets and Token Demand (Potential Upside for Bitcoin and #NDX)

The market has ignored extremely weak employment data from ADP, focusing its attention on other factors. The ADP report released on Wednesday showed a significant slowdown in the U.S. private

Pati Gani 10:40 2025-07-03 UTC+2

Trump Targets China Through Vietnam

Yesterday, it was revealed that President Donald Trump had reached a trade agreement with Vietnam. This came after several weeks of intense diplomatic negotiations between the two countries and just

Jakub Novak 10:00 2025-07-03 UTC+2

A Wake-Up Call for the U.S. Economy

Yesterday's U.S. employment data served as a wake-up call for the American economy. According to the report, the number of employed persons declined in June for the first time

Jakub Novak 09:55 2025-07-03 UTC+2

The Market Bets on Profits

The market remains confident in a positive future. It hears only what it wants to hear. Negative news is ignored, allowing the S&P 500 to set new records. It doesn't

Marek Petkovich 09:35 2025-07-03 UTC+2

What to Pay Attention to on July 3? A Breakdown of Fundamental Events for Beginners

A significant number of macroeconomic reports are scheduled for release on Thursday, including some key reports. As a reminder, U.S. labor market and unemployment data are typically released on Friday

Paolo Greco 06:53 2025-07-03 UTC+2

GBP/USD Overview – July 3: Jerome Powell Finally Responded to Trump

The GBP/USD currency pair plummeted on Wednesday like a stone. However, every drop in the pair eventually gives way to a much stronger rise. Therefore, at this point, there's

Paolo Greco 03:45 2025-07-03 UTC+2

EUR/USD Overview – July 3: One Big Trump Law Passed, Dollar at 4-Year Lows

The EUR/USD currency pair traded relatively calmly on Wednesday, although the word "calm" may not accurately describe the daily decline of the dollar. The most accurate picture of what's happening

Paolo Greco 03:45 2025-07-03 UTC+2

Transition from Aggressive to Cautious Position by the ECB

The annual economic forum is currently taking place in the Portuguese town of Sintra, which explains the daily speeches by central bank heads. Most of the information being shared

Chin Zhao 00:42 2025-07-03 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.