The EUR/USD exchange rate declined ahead of the ECB rate meeting | 12 December 2024

Events to pay attention to today:

15:15 EET. EUR - ECB Interest Rate Decision

15:30 EET. USD - Unemployment Claims

15:45 EET. EUR - ECB Press Conference

EURUSD:

On Wednesday, the EUR/USD exchange rate fell for a fourth consecutive day, losing 0.25% and reaching 1.0500. This decline occurred as traders awaited the European Central Bank's (ECB) latest rate decision. US consumer price index (CPI) inflation data was in line with market expectations, maintaining balance in broad dollar flows as investors await the release of the US producer price index (PPI) on Thursday.

The ECB's latest rate meeting is scheduled for Thursday, at which point investors are expected to receive confirmation of another quarter-point rate cut. The ECB's main refinancing operations rate is expected to be reduced to 3.15% from 3.4%, while the ECB deposit rate is anticipated to decline to 3.0% from 3.25%.

The US Consumer Price Index (CPI) saw a slight increase in the year to November, with core CPI rising to 2.7% year-on-year (y/y) from 2.6%, while core CPI inflation remained at 3.3% y/y. Additionally, monthly core CPI inflation increased in November, rising from 0.2% in October to 0.3%. Despite the overall increase in core inflation, the CPI data released on Wednesday was largely in line with expectations, resulting in a moderate investor sentiment.

CME's FedWatch tool indicates that there is a 95% probability of a 25 bp rate cut when the Fed convenes for its final rate meeting on 18 December. Despite a short-term rise in CPI inflation, investors have determined that the fluctuations in the published data are not significant enough to prompt the Fed to reconsider its latest quarter-point rate cut to end 2024.

The US PPI inflation figures are scheduled for release on Thursday. Market expectations are for a similar outcome to this week's CPI data, with producer-level inflation rising at the front end of the curve but generally remaining near recent levels. The core price index is forecast to rise to 3.2% y/y, up slightly from the previous reading of 3.1%.

Trading recommendation: Trading mainly by Sell orders from the current price level.

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