EUR/USD falls to near 1.0600 amid speculation for extension in Fed-ECB policy divergence

FXStreet
Updated Apr 16, 2024 12:45
Mitrade

  • EUR/USD drops to 1.0600 as the Fed is expected to pivot to rate cuts after the ECB.


  • Eurozone’s weak economic outlook and cooling inflation fuel ECB rate cut bets.


  • Fed policymakers emphasize keeping interest rates higher until they are sure about inflation returning sustainably to 2%.



The EUR/USD pair trades close to more than a five-month low near the round-level support of 1.0600 in the European session on Tuesday. The major currency pair is vulnerable to further downside as investors see the policy divergence between the Federal Reserve (Fed) and the European Central Bank (ECB) extending further.


Market expectations for the European Central Bank (ECB) to begin reducing interest rates from the June meeting have escalated. The weak Eurozone economic outlook and consecutive cooling core inflationary pressures for eight months have increased the likelihood of the ECB pivoting to rate cuts.


Last week, ECB President Christine Lagarde said if a fresh assessment increase policymakers' confidence that inflation is heading back to target, then it "would be appropriate" to cut interest rates, Reuters reported. ECB Lagarde delivered the statement in an interview post policy meeting in which the Main Refinancing Operations Rate was kept unchanged at 4.5%.


Meanwhile, traders have priced out expectations for Federal Reserve (Fed) rate cuts in the June and July policy meetings as core United States inflation remains stronger than expected in three months this year. This has strengthened the argument that the Fed should keep interest rates restrictive for a longer period.


Currently, investors expect that the Fed will start reducing interest rates from the September meeting. The Fed pivoting to rate cuts later than the ECB will stretch the policy divergence.


Going forward, speeches from various Fed policymakers will guide market expectations for Fed rate cuts. Fed policymakers are expected to support keeping interest rates higher until they are convinced that inflation will sustainably return to the desired rate of 2%.



EUR/USD

Overview
Today last price 1.0627
Today Daily Change 0.0003
Today Daily Change % 0.03
Today daily open 1.0624
 
Trends
Daily SMA20 1.0801
Daily SMA50 1.0821
Daily SMA100 1.0864
Daily SMA200 1.0828
 
Levels
Previous Daily High 1.0665
Previous Daily Low 1.062
Previous Weekly High 1.0885
Previous Weekly Low 1.0622
Previous Monthly High 1.0981
Previous Monthly Low 1.0768
Daily Fibonacci 38.2% 1.0637
Daily Fibonacci 61.8% 1.0648
Daily Pivot Point S1 1.0608
Daily Pivot Point S2 1.0592
Daily Pivot Point S3 1.0563
Daily Pivot Point R1 1.0653
Daily Pivot Point R2 1.0682
Daily Pivot Point R3 1.0698

 

 

* The content presented above, whether from a third party or not, is considered as general advice only.  This article should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments.

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