- EUR/USD holds steady above the 1.1000 mark as traders keenly await the ECB policy decision.
- Reduced bets for a more aggressive Fed easing underpin the USD and cap gains for the major.
- Traders seem reluctant ahead of the key central bank event risk and the release of the US PPI.
The EUR/USD pair struggles to gain any meaningful traction during the Asian session on Thursday and oscillates in a narrow band, just above the 1.1000 psychological mark, or a four-week low touched the previous day. Traders seem reluctant and opt to wait for the highly-anticipated European Central Bank (ECB) policy meeting before positioning for the next leg of a directional move.
The ECB is widely expected to lower interest rates by 25 basis points (bps) amid signs of cooling inflation in the Eurozone. The bets were reaffirmed by the data showing that the German Consumer Price Index (CP) print fell to its lowest level in over three years in August and touched the ECB's 2% target. This, in turn, undermines the shared currency and acts as a headwind for the EUR/USD pair amid a modest US Dollar (USD) strength.
The US CPI report released on Wednesday indicated that consumer prices in the US are easing overall. The core CPI, however, suggested that the underlying inflation remains sticky and dashed hopes for a larger rate cut by the Federal Reserve (Fed) next week. This is reinforced by an uptick in the US Treasury bond yields and lifts the USD Index (DXY), which tracks the buck against a basket of currencies, closer to the monthly peak.
That said, the markets have fully priced in the prospects for an imminent start of the Fed's policy easing cycle and a 25 bps rate cut at the end of the September 17-18 FOMC meeting. This, along with the upbeat market mood, caps any further appreciating move for the safe-haven Greenback. This should continue to offer some support to the EUR/USD pair heading into the key central bank event risk and warrants caution for bearish traders.
Investors might also prefer to wait for the ECB's updated economic projections, which, along with ECB Christine Lagarde's comments, will influence the Euro. Apart from this, the release of the US Producer Price Index (PPI) might provide a fresh impetus to the EUR/USD pair and produce some meaningful trading opportunities later during the North American session.
Economic Indicator
ECB Main Refinancing Operations Rate
One of the three key interest rates set by the European Central Bank (ECB), the main refinancing operations rate is the interest rate the ECB charges to banks for one-week long loans. It is announced by the European Central Bank at its eight scheduled annual meetings. If the ECB expects inflation to rise, it will increase its interest rates to bring it back down to its 2% target. This tends to be bullish for the Euro (EUR), since it attracts more foreign capital inflows. Likewise, if the ECB sees inflation falling it may cut the main refinancing operations rate to encourage banks to borrow and lend more, in the hope of driving economic growth. This tends to weaken the Euro as it reduces its attractiveness as a place for investors to park capital.
Read more.Next release: Thu Sep 12, 2024 12:15
Frequency: Irregular
Consensus: 4%
Previous: 4.25%
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
AUD/USD depreciates due to market caution ahead of US NFP
The Australian Dollar remains subdued against the US Dollar for the second consecutive day on Friday. The AUD/USD pair faces modest headwinds as the USD steadies ahead of the upcoming Nonfarm Payrolls report in the North American session.
USD/JPY: Japanese Yen stands firm near a multi-month high against a broadly weaker USD
The Japanese Yen continues to be underpinned by increasing bets for more BoJ rate hikes. Trade tariff jitters and the risk-off mood further seem to underpin demand for the safe-haven JPY. Expectations for further policy easing by the Fed weigh on the USD and the USD/JPY pair.
Gold price remains depressed ahead of US NFP; trade jitters to limit losses
Gold price trades with negative bias for the second straight day, though a combination of factors continues to act as a tailwind ahead of the crucial US NFP report later this Friday. Rising trade tensions continue to weigh on investors' sentiment.
Crypto AI Tokens: Why FET, NEAR and RNDR could outperform BTC after White House Summit
The White House Crypto Summit is scheduled to hold on Friday. Rather than double-down on BTC, sector-wide price trends show that investors are leaning towards Crypto AI altcoins.
Make Europe great again? Germany’s fiscal shift is redefining the European investment playbook
For years, Europe has been synonymous with slow growth, fiscal austerity, and an overreliance on monetary policy to keep its economic engine running. But a major shift is now underway. Germany, long the poster child of fiscal discipline, is cracking open the purse strings, and the ripple effects could be huge.
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.