As the ECB gears up for today’s decision, the anticipation is high for a 25bps rate cut to 3.50%, according to Scotiabank’s Chief FX Strategist Shaun Osborne.
Focus on ECB Guidance
“The key focus for markets will be on the guidance in the statement and President Lagarde’s press conference. While markets are pricing in further easing in Q4, it remains uncertain if the ECB will align with market expectations,” Osborne explains.
“A more cautious approach to easing could indicate the ECB’s preference for maintaining a 25bps per quarter pace, providing some support for the EUR.”
“Despite a slight intraday uptick, the overall sentiment for the EUR appears bearish following yesterday’s failed rally. With support holding in the low 1.10s, there is a growing risk of a softening trend and a test of higher 1.09s support levels.”
Analysis:
The ECB’s decision to potentially cut rates can have a significant impact on the financial markets. As an investor, it’s crucial to pay attention to the guidance provided by the ECB and President Lagarde’s press conference. The EUR may experience fluctuations based on the pace of easing adopted by the ECB, with a slower rate potentially offering some support for the currency. However, there is a risk of a softer trend in the EUR, with key support levels being tested in the high 1.09s. Stay informed and monitor market developments to make informed decisions about your investments.