EUR/USD Shows Resistance as Traders Await ECB’s Monetary Policy Decision

EUR/USD struggles to maintain its intraday high and defend the 1.1100 round figure during Thursday's European session.

Arslan Butt•Thursday, July 27, 2023•2 min read

[[EUR/USD]] struggles to maintain its intraday high and defend the 1.1100 round figure during Thursday’s European session. The Euro pair has remained relatively stronger for two consecutive days but lacks significant upside momentum due to cautious sentiment ahead of the European Central Bank’s (ECB) monetary policy decision.

The recent growth and inflation data from the Eurozone and Germany have been less than optimistic, indicating the possibility of a recession, which limits the ECB’s ability to raise benchmark interest rates, even in the face of hawkish market expectations. While the consensus suggests a 0.25% rate hike by the bloc’s central bank, all eyes are on ECB President Christine Lagarde’s speech for confirmation of future rate trajectory amid speculations of a policy pivot.

In contrast, the US Dollar Index (DXY) shows a three-day downtrend despite the Federal Reserve’s (Fed) 0.25% interest rate hike and the readiness for another rate increase in September. The greenback may also be weighed down by expectations of further easing in US data, posing a challenge to the Fed’s plans for rate hikes in September.
Interest rate futures indicate increasing probabilities of a September Fed rate hike, as shown by the CME’s FedWatch Tool, which displays a 23% chance, up from 21% on Tuesday and 13.7% a week ago. However, the odds of rate hikes beyond September have been minimal, mainly due to mixed data releases.

While the Conference Board’s (CB) Consumer Confidence Index for July shows positivity, housing numbers for June present a mixed picture. The previously released inflation and employment indicators have not been impressive, putting pressure on the US Dollar Index. Nevertheless, the International Monetary Fund (IMF) has raised the US economic growth forecast for 2023, challenging DXY sellers ahead of the first readings of the US Gross Domestic Product (GDP) for Q2, which is expected to ease to 1.8% from 2.0%.

Traders will also keep a close eye on US Durable Goods Orders for June, which are likely to ease to 1.0% from the previous 1.8% (revised), as well as German GfK Consumer Confidence and US Initial Jobless Claims.
Overall, the EUR/USD currency pair’s movement will be influenced by the ECB’s decision and forward guidance, as well as the data releases from the US and Germany.

Check out our free forex signals
Follow the top economic events on FX Leaders economic calendar
Trade better, discover more Forex Trading Strategies
Open a FREE Trading Account

ABOUT THE AUTHOR See More

Arslan Butt

Index & Commodity Analyst

Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics. His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker. His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.