The European Central Bank (ECB) is getting ready to implement its first consecutive rate cut in 13 years. It is widely anticipated that the deposit rate will be reduced by 25 basis points to 3.25% today. This move comes as a response to the increasing need for monetary easing due to a faster-than-expected decrease in inflation and ongoing struggles in the manufacturing sector affecting services and employment.
Initially, December was considered the most suitable time for the next rate cut. However, recent economic data has raised concerns among ECB officials, prompting them to take action sooner. The upcoming December meeting is crucial, as it will include updated economic projections that will guide policy decisions in 2025.
Although the market is anticipating three more rate cuts by March 2025, ECB President Christine Lagarde is not likely to provide explicit guidance during the current announcement. Nevertheless, it is expected that the overall message will hint at the possibility of another rate cut in December unless there is a significant improvement in the economic outlook.
From a technical perspective, the EUR/USD pair has been experiencing a decline from its short-term peak of 1.1213. The near-term outlook remains bearish as long as the 55-day exponential moving average (EMA) at 1.0999 holds. This decline is viewed as the third phase of a corrective pattern from the 2023 high of 1.1274, with the next target being the 61.8% retracement level at 1.0740. Any further dovish statements from the ECB could intensify this downward trend.
It is essential for investors and market participants to closely monitor the ECB’s decision and accompanying statements, as they can have a significant impact on currency markets and overall economic sentiment. The central bank’s actions will play a crucial role in shaping future monetary policy and addressing economic challenges in the Eurozone. Stay tuned for updates on how these developments unfold and their implications for global financial markets.
