EUR/USD experienced a pullback on Thursday following the European Central Bank’s decision to maintain rates at their current level. Meanwhile, traders continued to process the ‘hawkish’ cut announced by the Federal Reserve on Wednesday, which resulted in the shared currency remaining below the 1.1600 mark. The pair is currently trading at 1.1565, reflecting a decrease of 0.30%.
EUR/USD declines by 0.30% following the ECB’s decision to maintain rates, as market participants assess the Fed’s aggressive 25-bps cut. Lagarde observes a reduction in downside risks due to the US–China truce and stability in the Middle East; however, the inflation outlook remains muted. Powell suggests a potential pause as the FOMC shows division, referencing a robust labor market and persistently high inflation.
> ECB’s Lagarde states that policy is “in a good place” as risks diminish : The ECB maintained its three interest rates at their current levels, with the Deposit Facility, Main Refinancing, and Marginal Lending Rates remaining at 2.00%, 2.15%, and 2.40%, respectively. ECB President Christine Lagarde remarked that monetary policy is in a “good place” as economic risks lessen and the Eurozone economy demonstrates signs of resilience. Lagarde noted that the trade dynamics between Europe and the US, the de-escalation of conflict in the Middle East, and the trade truce between China and the US have alleviated potential risks to economic growth. The ECB is anticipated to release its economic projections extending to 2028 during the December meeting. Should certain policymakers foresee inflation falling short of the bank’s target, this will substantiate discussions regarding additional easing at the forthcoming meeting. The Federal Reserve in the US has reduced rates by 25 basis points and suggested a potential pause in its easing cycle, noting a split within the Federal Open Market Committee. Additionally, Fed Chair Jerome Powell disclosed that the central bank gathered state data concerning unemployment claims, emphasizing that the jobs market has not weakened as anticipated.
Latest FX Rate Trends : The robust performance of the US Dollar exerts pressure on the Euro
- The US Dollar Index, which measures the value of the dollar against six major currencies, has increased by 0.37%, reaching a level of 99.50.
- President Lagarde of the ECB remarked that she would not express dissatisfaction regarding the economy’s growth of 0.2% in Q3 within the Eurozone.
- The ECB’s monetary policy statement indicated that inflation is nearing 2% and noted that it is not bound to a specific rate trajectory. The ECB observed, “The economy has continued to grow despite the challenging global environment.”
- The Federal Reserve has reduced its benchmark rate by 25 basis points, bringing it to a range of 3.75%–4%, following a 10–2 vote. The decision reflected differing opinions, as Fed Governor Stephen Miran advocated for a more substantial 50-bps cut, while Kansas City Fed President Jeffrey Schmid opted to maintain the current rates.
- During the press conference, Fed Chair Jerome Powell caught the markets off guard by stating, “a further reduction in the policy rate at the December meeting is not a foregone conclusion — far from it.”
- Fed Chair Jerome Powell emphasized that the central bank’s main priority continues to be the labor market. He pointed out that although official data is scarce, state-level unemployment claims indicate that the jobs market is not experiencing a significant decline.
- Powell also noted that several FOMC members perceive interest rates as being at or close to a neutral stance, suggesting that monetary policy may be suitably aligned with the prevailing economic conditions.
- The recent trade developments between the US and China have strengthened the US dollar following President Trump’s meeting with his counterpart Xi Jinping. Trump described the meeting as “amazing,” noting that China has consented to restart soybean purchases. As a result, Washington lowered fentanyl tariffs to 10% and decreased tariffs on goods from China from 57% to 47%. Trump indicated that the issues surrounding rare earths had been addressed, thereby facilitating discussions regarding chips with China.