Euro holds above recent floor as ECB verdict nears
EUR/USD has climbed back toward 1.1150 after revisiting its October 14 trough near 1.1100 on Wednesday, breaking a five-day losing run ahead of Thursday's European Central Bank announcement.
The pair had declined for five consecutive sessions before rebounding from the same level touched on October 14. It now looks set to post its first daily advance in six sessions.
This rebound came after the Federal Reserve chose to leave rates unchanged in a 10-2 vote. Cleveland Fed President Beth Hammack and Governor Lisa Cook both pushed for a quarter-point increase instead, marking the first time Cook has dissented since joining the board back in 2022. The accompanying Fed statement also upgraded its description of US growth to “strong,” a step up from the prior “solid” language. Market pricing for a rate hike in December moved up to near 81%, from 75% beforehand, once the decision was released.
Speaking afterward, Fed Chair Kevin Warsh indicated that he is skeptical of forward guidance when there is no crisis underway, noting that market-determined rates have already drifted downward. EUR/USD hit its intraday peak while he was addressing reporters.
Focus now shifts to the ECB, which is set to deliver its rate decision on Thursday at 13:15 GMT, with the deposit rate widely expected to hold at 2.5%. President Christine Lagarde will brief the press at 13:45 GMT. Earlier that day, at 12:30 GMT, the US will release third-quarter GDP figures, projected to show annualised growth of 3.2% versus 2.2% previously, just before the ECB’s announcement. Eurozone growth data for the same quarter follows on Friday at 10:00 GMT, with economists expecting a slowdown to 0.2% from 0.6%.
Since the start of October, EUR/USD has been boxed into a range with a ceiling just over 1.1250, continuing a broader pullback from August’s peak above 1.1700. The pair has remained beneath its 50-day exponential moving average, around 1.1350, since the middle of September.
Why it matters: Thursday’s ECB rate decision and Lagarde’s commentary will shape the euro side of the interest-rate gap behind EUR/USD, while the US GDP print and evolving Fed hike expectations will drive the dollar side. Combined, these events could decide whether the euro extends its recovery or slips back toward recent lows.
Source: FXStreet