EURUSD Holds Above 1.10 After the 25 bps ECB Rate Cut

EURUSD was showing resilience last month, peaking just above 1.12, but since the last week of August, it has been falling lower, approaching the 1.10 level as the Eurozone economy continues to be headed toward a possible recession, which has forced the ECB to embark on a steeper rate cut journey, cutting interest rates by 60 basis points today.

The daily chart shows that the 20 SMA (gray) turned into support on the daily chart and a bounce followed. However, after the US Non-Farm Payroll (NFP) announcement, EUR/USD failed to break above the 1.1150s resistance level and subsequently dropped into the 1.10 range. The 20 SMA turned into resistance on Tuesday around 1.1050, which shows that highs were getting lower as we headed into the ECB meeting today. However, the price stayed close to 1.10.

EUR/USD Chart Daily – The 1.10 Level Held As Support

The European Central Bank’s decision to cut the refinancing rate by 60 basis points was widely anticipated, as it primarily serves as a technical adjustment to better align with their broader monetary strategy. This move is aimed at narrowing the gap between the refinancing rate and the deposit rate to roughly 15 basis points, which will allow the ECB to more effectively control market rates. By tightening this spread, the ECB gains greater precision in managing liquidity and interest rate transmission across the eurozone.

European Central Bank September 12 Policy Meeting

• Full statement

In their accompanying statement, the ECB reiterated that inflation continues to pose a risk heading into the fourth quarter of the year. This aligns with their ongoing policy stance, suggesting that they may continue to reduce rates, possibly at a pace of one cut per quarter, depending on the evolving economic outlook. Despite the significance of the rate cut, the EUR/USD exchange rate initially showed little reaction, staying at 1.1020. However, following the release of key US economic data, the euro saw a modest boost, pushing the pair up to 1.1040. This highlights the ongoing interplay between European and US monetary policy, with global markets closely monitoring every move from both central banks.

EUR/USD Live Chart