EUR/USD tumbled 150 pips lower yesterday following the strong US CPI inflation but stalled at 1.0720s. Today the ECB has sent it below 1.07 after keeping interest rates on hold this time, but it did mention rate cuts in the statement and in Lagarde’s speech, which is weighing on the Euro.

EUR/USD Chart Daily – Sellers Testing the 1.07 Support Level

EUR/USD was bullish for about a week, as the USD was retreating ahead of the CPI report, with traders fearing a soft inflation number. But the 100 SMA (green) held as resistance on the daily chart and the price reversed lower, breaking below the 200 SMA (purple) as well. Now, this pair is facing the 1.07 level and will likely break below it soon, as the ECB is about to start cutting rates.

ECB Monetary Policy Decision – 11 April 2024

• Main refinancing rate: The main refinancing rate was maintained at 4.50%, in line with market expectations.
• Deposit facility rate: The deposit facility rate was also held steady at 4.00%, consistent with market expectations.
• Marginal lending facility: The marginal lending facility rate remained unchanged at 4.75%.
• Inflation outlook: The ECB noted that most measures of underlying inflation are easing, and wage growth is gradually moderating. Inflation has continued to decline, particularly driven by lower food and goods price inflation. However, domestic price pressures remain strong, keeping services price inflation elevated.
• Policy stance: The ECB emphasized that it is not pre-committed to a particular rate path and will continue to follow a data-dependent approach and a meeting-by-meeting approach in its monetary policy decisions.
• PEPP reinvestment: The ECB intends to discontinue reinvesting the proceeds from its Pandemic Emergency Purchase Programme (PEPP) at the end of 2024.

ECB President Christine Lagarde Comments

1. Data and projections: The ECB will be closely monitoring upcoming data releases in April and June, as well as new projections. They are particularly interested in whether the data confirms their expectations for inflation.
2. Rate cut considerations: While some members expressed confidence in cutting rates, a majority preferred to wait for more data before making any decisions. This underscores the ECB’s commitment to being data-dependent rather than influenced by external factors like the US Federal Reserve’s actions.
3. Balance sheet reduction: The ECB noted that its balance sheet has already reduced significantly, indicating progress in its monetary policy normalization efforts.
4. Eurozone versus US inflation: There are differences highlighted between inflation dynamics in the eurozone compared to the United States, particularly concerning consumption patterns and fiscal responses.
5. Response to disinflation: If disinflation continues, the ECB will adjust its rate path accordingly. They mentioned

EUR/USD Live Chart