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The EUR/USD pair weakens to near 1.0290 during the early European session on Friday. The expectation of further rate cuts by the European Central Bank (ECB) drags the Euro (EUR) lower against the Greenback. Traders await the Eurozone Current Account and Harmonized Index of Consumer Prices (HICP) for fresh impetuses, which will be released later on Friday. Also, the ECB board member Piero Cipollone is set to speak on the same day.
The ECB Monetary Policy Meeting Accounts released on Thursday showed that policymakers agreed last month that interest rate cuts should be approached cautiously and gradually, but they also noted that further rate cuts remain on the cards.
The ECB will next meet on January 30 and investors have fully priced another 25 basis points (bps) cut. According to Reuters polls conducted between January 10-15, all 77 economists expect the ECB to cut the Deposit Facility rate by 25 bps to 2.75% at the January meeting, with 60% anticipating three additional 25-bps interest rate reductions by the middle of the year. Rising bets on further ECB reductions could weigh on the shared currency in the near term.
Across the pond, the US Federal Reserve (Fed) next monetary policy meeting is scheduled for January 28-29 and traders are nearly unanimous in their view the US central bank will hold the interest rates steady after cutting them by a full percentage point in late 2024.
Analysts believe that the uncertainty surrounding potential fiscal, trade, immigration, and regulatory policies from the incoming Donald Trump administration could dampen prospects for Fed rate cuts despite easing US inflation. This, in turn, might provide some support to the US Dollar (USD) and act as a headwind for EUR/USD. More By This Author:WTI Drifts Lower Below $78.00 On Halt In Houthis’ Red Sea Attacks USD/CAD Holds Below 1.4350 As US CPI Data Boosts Fed Rate Cut Bets USD/CAD Weakens To Near 1.4350 On Cooler-Than-Expected US PPI Inflation Data
