- The European Central Bank lowered interest rates for the first time since 2019.
- The ECB’s Lagarde refrained from committing to a path of interest rate cuts.
- There was caution ahead of the US non-farm payrolls report.
EUR/USD price analysis leans bullish from the euro after the ECB failed to provide clear guidance on the outlook for interest rate cuts. On the other hand, the dollar was near an eight-week low as investors braced for the US non-farm payrolls report.
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The European Central Bank cut interest rates for the first time since 2019, becoming the second major central bank to do so. The move came as policymakers gained confidence that inflation in the bloc was under control. The ECB is fighting a price hike from 2022 when inflation was 10%. Fortunately, the central bank lowered this figure to slightly above the target of 2%.
However, they did not expect him to remain stubborn at this level. The latest inflation report was warmer than expected, which was the main reason policymakers were cautious after the policy meeting. Investors were expecting some guidance on the future. However, Lagarde refrained from committing to a rate cut, noting that inflation and wage growth remain strong.
Some analysts believe the ECB was too quick to commit to a rate cut before the latest inflation report. Moreover, forecasts released by the central bank show that inflation will remain above the target of 2% until the end of next year. After the meeting, markets pegged just one more rate cut this year, likely in September.
Meanwhile, there was caution ahead of the US non-farm payrolls report, which will provide insight into Fed policy. Economists expect an increase of 182,000 jobs in May. Therefore, anything higher or lower could cause a lot of volatility in the market.
EUR/USD key events today
- US Nonfarm Payroll Report
Technical analysis of EUR/USD prices: Volatile near 30-SMA
On the technical side, EUR/USD has respected the 30-SMA support and is trading above the key level of 1.0880. Furthermore, the RSI has remained above 50 since the bulls took over, supporting solid momentum.
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However, the price remains close to the SMA, which could indicate reluctance among bulls to move higher. If this hesitation continues, the bears are likely to come back and take control with a break below the SMA. However, if it is just a pause, the price will soon rise to reach higher highs above the 1.0925 level.
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