EUR gains after ECB leaves interest rate path uncertain

Key points

• EUR/USD jumped to 1.1035 after ECB’s 25 bps rate cut to 3.5%
• Euro strengthened against AUD, CAD, CHF, JPY, and GBP
• US dollar index fell to lows of 101.53
• USD declined against AUD, GBP, MXN, and NOK
• Future of EUR/USD depends on Fed’s rate cut decision and market confidence

Euro renews strength as ECB rate cut path remains ambiguous

EUR/USD jumped to 1.1035 this morning upon the European Central Bank’s decision to cut interest rates by 25 bps to 3.5%. This decision aligned with analysts’ forecasts and was likely made to bring inflation back to the ECB’s target of 2%. The rate cut also underscores the ECB’s dedication to supporting economic growth amid recession risks. However, the rate cut path remains ambiguous as President Christine Lagarde declared that they would not pre-commit to a specific rate cut trajectory.

EUR/USD price history

Euro dominates against major currencies

The ECB’s decision to cut interest rates bolstered the euro against more than just the US dollar. Today, the euro is up against the Australian dollar (AUD), Canadian dollar (CAD), Swiss franc (CHF), Japanese yen (JPY), and British pound (GBP), among others. This strength is likely due to the hawkish tone from the ECB as they refused to confirm more rate cuts coming. Markets are still pricing in more cuts from the US and countries outside the Eurozone. Additionally, increased speculative trading may have driven traders to buy the euro in anticipation of further appreciation.

US dollar experiences broad-based declines against major currencies

Contrary to today’s success for the euro, it is not a great day for the greenback; the US dollar index has fallen to lows of 101.53 this morning. In addition, the dollar is down against several pairs, including the Australian dollar, British pound, Mexican peso, and Norwegian krone, among others. This broad-based decline suggests a shift in market sentiment away from the USD as traders wait US policy change.

What’s next for EUR/USD?

Since the United States awaits an official statement regarding rate cuts, the immediate future of the EUR/USD currency pair remains ambiguous. If there is sustained confidence in the ECB’s monetary policy, the EUR/USD pair could continue to see an uptick driven by confidence in the euro. If the US Fed implements the forecasted rate cuts of 25 bps, this could lead to a more immediate weakening of the dollar, especially if the cut is accompanied by concerns over economic weakness. Traders should remain vigilant to these developments to make well-timed trading decisions.

How to trade EUR/USD

1. Open an account to get started, or practice on a demo account
2. Choose your forex trading platform
3. Open, monitor, and close positions on EUR/USD

Trading forex requires an account with a forex provider like tastyfx. Many traders also watch major forex pairs like EUR/USD and USD/JPY for potential opportunities based on economic events such as inflation releases or interest rate decisions. Economic events can produce more volatility for forex pairs, which can mean greater potential profits and losses as risks can increase at these times.

You can help develop your forex trading strategies using resources like tastyfx’s YouTube channel. Our curated playlists can help you stay up to date on current markets and understanding key terms. Once your strategy is developed, you can follow the above steps to opening an account and getting started trading forex.

Your profit or loss is calculated according to your full position size. Leverage will magnify both your profits and losses. It’s important to manage your risks carefully as losses can exceed your deposit. Ensure you understand the risks and benefits associated with trading leveraged products before you start trading with them. Trade using money you’re comfortable losing.