An ECB Interest Rate Cut in March is A Done Deal
The bearish signals for the Euro are increasing, as the rate of EUR to USD declined last week, after three weeks of gains.
The bearish signals for the Euro are increasing, as the rate of EUR to USD declined last week, after three weeks of gains. The FED is refraining from giving a fixed date regarding the start of interest rate cuts, while the ECB is making it increasingly clear that in June we will see the first rate reduction from them, which is weighing on the Euro recently.
EUR/USD Weekly Chart – Will the Reversal Continue This Week?
Despite the buying momentum in this forex pair and gradual gains since mid-February, buyers have shown weakness as the price gets close to the 1.10 level which indicates that EUR/USD traders are not confident to push the price above this level, which now is a potential barrier for further upward movement. The subsequent reversal in price dynamics on Friday suggests weakening buying interest, leading to a depreciation of the Euro against the US dollar by over 100 pips. As a result, this pair closed the week below 1.09 on Friday.
Last week there were many ECB members pushing hard for a June rate cut. ECB Vice President Luis de Guindos and Executive Board member Klaas Knot provided important insights into the central bank’s future monetary policy decisions last week. De Guindos anticipates an improvement in Europe’s economy in the second half of 2024 and emphasizes that monetary policy decisions will be based on sufficient information available in June. He also expressed concern about the rising value of financial assets.
On the other hand, Knot expects the ECB to start the monetary easing in June, followed by further cuts in September and December. He suggests that interim meetings could also be utilized to decrease interest rates if new evidence indicates the necessity for additional monetary stimulus. These remarks provide clarity on the ECB’s potential actions and underscore the importance of upcoming economic data in shaping monetary policy decisions. Over the weekend, De Cos reinforced this idea, repeating the June rate cut scenario. So, we expect that the Euro will grow weaker, with the German economy also being in a difficult spot.
Bank of Spain´s Governor and European Central Bank Governing Council (GC) Member Pablo Hernandez de Cos
According to statements from Spain’s central bank president Pablo Hernandez de Cos, the European Central Bank (ECB) is considering reducing interest rates in June. He mentioned that if macroeconomic forecasts align with expectations in the coming months, it would be natural to start cutting rates soon, with June being a potential starting point.
Regarding discussions within the Governing Council (GC) in June, de Cos noted a high level of consensus among members and expressed hope that this consensus would persist. However, when asked about the possibility of three 25-basis-point rate reductions this year, de Cos refrained from providing a specific timeline for rate changes. Instead, he emphasized that current market conditions are conducive to achieving the ECB’s medium-term inflation target of 2%, without explicitly detailing the timing of rate adjustments.
EUR/USD Live Chart
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