The United States Federal Reserve is set to trim interest rates for the first time in over four years, while the European Central Bank delivered rate cuts but maintained its cautious approach this week. As a result, the EUR/USD pair struggled to overcome the 1.1100 mark with a mildly bullish stance, ending the week little changed.
ECB Cuts Rates Amidst Gloomy Economic Outlook
The ECB reduced the deposit facility rate by 25 basis points as expected, citing sluggish economic growth in the Eurozone. Despite the cautious approach, ECB President Christine Lagarde noted the recovery faces headwinds and policymakers see upward risks for inflation. The announcement had a limited impact on the Euro, with EUR/USD advancing due to discouraging US data.
US Inflation Disappoints, Fed Likely to Cut Rates
The US reported lower than expected Consumer Price Index (CPI) and Producer Price Index (PPI) figures, reducing hopes for a 50 basis points interest-rate cut by the Federal Reserve. The Fed is expected to deliver a modest 25 bps cut and release a Summary of Economic Projections, which could impact the US Dollar’s strength.
Fed’s Path and Economic Progress
The Fed’s decision on interest rates will be crucial, with expectations of a wider cut due to concerns about economic growth. Despite inflation holding above the 2% goal, the US economy has been struggling, leading to the need for rate cuts to stimulate growth and maintain competitiveness.
Upcoming Events to Watch
Other central banks, such as the Bank of England and the Bank of Japan, will also announce monetary policy decisions. Economic data releases from the US and Eurozone, including Retail Sales and Consumer Confidence, will provide further insights into the economic outlook.
EUR/USD Technical Analysis
Technically, EUR/USD faces upside potential, with moving averages supporting a bullish case. However, the pair needs to surpass key levels to maintain its bullish momentum, with 1.1140 and 1.1200 as critical resistance levels. Failure to hold above 1.1000 could lead to a significant downside move towards 1.0900.
