EUR/USD trades cautiously around 1.1400 ahead of ECB’s interest rate policy

EUR/USD is expected to remain on the sidelines around 1.1400 ahead of the ECB’s monetary policy announcement.
The ECB is expected to lower its Deposit Facility Rate by 25 bps to 2%.
Soft US data has prompted stagflation risks, and the NFP data is in focus.

Sagar Dua FXStreet

The EUR/USD pair trades with caution, slightly above the key level of 1.1400 during Asian trading hours on Thursday. The major currency pair is expected to remain sideways, with investors awaiting the European Central Bank's (ECB) interest rate decision announcement at 12:15 GMT.

The ECB is almost certain to reduce its key borrowing rates by 25 basis points (bps), a move that will lower the Deposit Facility Rate and Main Refinancing Operations Rate to 2% and 2.15%, respectively. This will be the seventh consecutive interest rate cut by the ECB and the eighth since June last year, when it initiated its monetary expansion cycle.

Traders are increasingly confident about a seventh consecutive ECB interest rate cut as the disinflation trend in the Eurozone is intact. Preliminary Eurozone Harmonized Index of Consumer Prices (HICP) data showed on Tuesday that inflationary pressures fell below the central bank’s target of 2%.

As the Fed is widely anticipated to lower interest rates, investors will pay close attention to ECB President Christine Lagarde’s press conference to get cues about the likely monetary policy stance for the second half of the year. Market participants would also like to know the status of trade negotiations with the United States (US).

Meanwhile, the US Dollar (USD) struggles to hold ground near the six-week low as weak US data has renewed stagflation risks. The ISM Services Purchasing Managers’ Index (PMI) data unexpectedly declined in May, while its sub-components indicated that input costs continued to expand at a faster pace. The ADP Employment Change data, which reflects labor demand in the private sector, showed the addition of fresh 37K workers in May, the lowest reading seen since January 2021.

US President Donald Trump criticized the Federal Reserve (Fed) again for maintaining a restrictive monetary policy stance after weak private employment data.

Going forward, investors will focus on the US Nonfarm Payrolls (NFP) data for May, which is scheduled to be released on Friday.

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.

AUD/USD flatlines near 0.6965 as less hawkish RBA counters USD weakness

AUD/USD holds steady above a two-week low, trading near 0.6965 in the Asian session on Wednesday as early midterm election results heighten political uncertainty and weigh heavily on the US Dollar. Moreover, reviving safe-haven demand triggers a fresh leg down in US bond yields, offsetting Fed hike bets and exerting additional pressure on the buck. However, a less hawkish RBA caps the Aussie.

USD/JPY declines below 158.00 as USD weakens on midterm election results

USD/JPY comes under heavy selling pressure on Wednesday, dropping below 158.00 during the Asian session as the US Dollar slumps to a one-month low amid heightened political uncertainty after early US midterm vote counts. Moreover, the prospect of gridlock in Washington drives safe-haven flows, triggering a fresh leg down in US bond yields and further weighing on the buck.

Gold pops to four-day highs near $4,050

Gold manages to regain some composure, leaving behind two consecutive daily pullbacks and reclaiming the area above the key $4,000 mark per troy ounce on Wednesday. The strong decline in the US Dollar, shrinking US Treasury yields across the curve and lower crude oil price all contributes to the yellow metal’s recovery.

Crypto Today: Bitcoin, Ethereum, XRP extend advance as US Dollar slides on Democrats' US midterm victory

Bitcoin trades above $78,000 on Wednesday as risk-on sentiment improves in the broader cryptocurrency market. Ethereum mirrors BTC’s recovery outlook, hovering above $2,300. Ripple similarly exchanges hands above $1.28, marking two consecutive days of gains.

US midterms 2026: Investor Q&A on the Democratic sweep

1. Gridlock replaces the stimulus narrative. A Democratic Congress would constrain Trump's ability to pursue additional fiscal expansion and legislative tax measures. But it cannot simply reverse the president's entire economic agenda. Executive powers, existing legislation and presidential vetoes remain important. 2. AI faces a higher hurdle, not an extinction event.

US Dollar breaks below 101.50 as Democrats sweep Congress

The US Dollar (USD) comes under heavy selling pressure on Wednesday, with the US Dollar Index (DXY) falling around 0.5% to trade near 101.35 after sliding below the 101.50 level. The Greenback retreats to its lowest level in four weeks as investors reassess the political and economic outlook following the Democratic Party's sweeping victory in the United States (US) midterm elections.