EURUSD is trading in a tight range, just below 1.0950, ahead of the ECB policy meeting.

The EURUSD trades flat in Thursday’s European session after surging to a new four-month high near 1.0950 on Wednesday. The major currency pair is likely to remain quiet as investors sit on the sidelines. Ahead of the European Central Bank’s (ECB) policy meeting, which will be released at 12:15 GMT.

The ECB is expected to keep its key rates unchanged this week. As officials have been hesitating from committing to a pre-defined rate-cut path over concerns about sticky inflation in the service sector. Which could Reverse the disinflation process. As a result, investors will be looking for clues on when the ECB may slash interest rates further.

ECB President Christine Lagarde may not propose a specific rate-cut path, instead emphasizing the need for further data to ensure. That the disinflation process does not halt before relaxing policy further.

After two years of maintaining a tight interest rate framework to temper rising inflationary pressures caused by coronavirus-pandemic-led stimulus, the ECB reduced interest rates for the first time in June. The justification for relaxing the tight policy stance was authorities’ solid belief. That threats to inflation and the economy are finely balanced and that price pressures will revert to the intended rate of 2%.

Currently, financial markets expect the ECB to provide two additional Rates are being reduced this year. The ECB is also likely to announce its next rate drop in September.

Daily Market Movers: EURUSD swings sideways, US Dollar stays frail.

EURUSD consolidates near 1.0950 ahead of the ECB’s policy decision. The shared currency pair’s near-term outlook remains strong. As the US Dollar (USD) remains fragile. The US Dollar Index (DXY), which measures the value of the US dollar against six major currencies. Appears to be weak near a more than three-month low of 103.70.

The expectation of a firm Fed rate drop has weighed on the US dollar.

The US dollar could fall further as there is widespread belief. That the Federal Reserve (Fed) would begin lowering interest rates at its September meeting. Price pressures have eased and labor market conditions have cooled, fueling optimistic expectations for Fed rate decreases. June’s Consumer Price According to the Consumer Price Index (CPI) report, yearly headline and core inflationary pressures have decelerated quicker than projected.
The Fed’s Beige Book, released on Wednesday, showed that firms experienced modest growth and decreased labor demand from late May to early July. Recent job data also showed that the unemployment rate increased to 4.1%, the highest level since December 2021.
Meanwhile, recent inflation numbers have reinforced policymakers’ confidence that inflation will return to its objective of 2%. On Wednesday, Fed Governor Christopher Waller expressed confidence in the job market and inflation being moderate. When asked about rate cuts, Waller replied, “I do believe we are getting closer to the time when a reduction in the policy rate is warranted,” according to Reuters.