ECB kept the interest rate unchanged | 12 Abril 2024

Events to watch out for today:

17:00 EET. USD - Consumer Sentiment Index from the University of Michigan

21:30 EET. USD - FOMC member Rafael Bostic will give a speech

22:30 EET. USD - FOMC member Mary Daly will give a speech

EURUSD:

EUR/USD is trading near 1.0720 on Friday in the early Asian session. A moderate recovery in the US dollar (USD) amid growing speculation of a Fed rate cut in September is putting pressure on the major pair. On Thursday, the European Central Bank (ECB) kept interest rates at record highs as expected and opened the door for a rate cut in June.

The U.S. wholesale inflation reading for March was softer than expected, boosting hopes for a rate cut by the Federal Reserve (Fed) this year. The U.S. Producer Price Index (PPI) rose 0.2% month-over-month in March, compared to a forecast of 0.3%. On a year-over-year basis, the PPI rose 2.1% over the same period, the largest increase since April 2023. In addition, the core producer price index, excluding food and energy, rose 2.4% y/y, beating market expectations, according to data from the Bureau of Labor Statistics released Thursday.

The report had little impact on the market. According to the CME FedWatch Tool, investors are now evaluating the possibility of only two rate cuts this year, which will likely begin in September. 'The minutes of the FOMC meeting released on Wednesday showed that participants noted their uncertainty about the high level of inflation, and the latest data did not bolster their confidence that inflation is steadily falling to 2%,' the minutes said."

Yesterday, the ECB kept its key interest rate unchanged at 4.0% for the fifth consecutive meeting. The central bank also hinted at an upcoming rate cut, despite uncertainty over the Fed's future actions. According to LSEG data, markets expect the ECB to cut the ECB rate by 25 basis points (bps) in June. Growing speculation that the ECB will cut rates ahead of the US Fed has put pressure on the Euro (EUR).

Trading recommendation: Trade mainly with buy orders at the price level of 1.0760. We consider sell orders at the price level of 1.0710.

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