18 July 2024, EUR/USD
Event to pay attention to today:
15:15 GMT+3. EUR - ECB Interest Rate Decision
EURUSD:
On Wednesday, the EUR/USD reached a new 18-week high as market sentiment shifted towards risk ahead of the European Central Bank's (ECB) upcoming rate meeting on Thursday. The current market climate is characterised by a limited appetite for risk, reflecting the full appreciation of the Federal Reserve's (Fed) rate cut on 18 September.
The latest ECB rate decision on Thursday will be watched closely by traders. It is anticipated that the ECB will maintain the current interest rates for the time being, as policymakers are undecided following the early quarter-point rate cut in June. In light of the expectation that the ECB will maintain its current interest rates, market participants will be monitoring for any updates in the remarks made by ECB President Christine Lagarde during her speech later in the European market session.
The betting markets are fully priced for at least a quarter-point rate cut when the Federal Open Market Committee (FOMC) meets on 18 September, with rates expected to remain unchanged at the July meeting. The CME's FedWatch tool indicates that there is a 98% probability of a rate cut in September, with traders anticipating three cuts in 2024, compared to the Fed's more modest expectations of one or two.
Despite the growing consensus among market participants that the Federal Reserve will cut interest rates, remarks from key policymakers painted a less optimistic picture of the economy. Both Federal Reserve Governor Christopher Waller and Richmond Federal Reserve Bank President Thomas Barkin highlighted the resilience of the labor market despite the easing of inflationary pressures.
Trade recommendation: Trading predominantly Buy orders from the current price level.
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