ECB is widely anticipated to maintain main refinancing rate at 4.50% and deposit rate at 4.00% in today’s meeting. There is clear consensus among officials on the plan for rate cuts this year. However, the timing and pace of these reductions remain subjects of debate among them.
Economists generally agree on a June timeline for the initial rate reduction, citing that current economic indicators do not yet justify an earlier move. Also, ECB is expected to await further wage data due in May, rendering an April cut less probable.
Key points of interest in today’s meeting include: the possibility of a rate cut being actually discussed, any indicative changes in the statement towards policy easing, and, importantly, the new economic projections. These projections are key to understanding the ECB’s confidence in returning inflation to its 2% symmetric target within a feasible timeframe.
Euro’s performance this week has been mixed, registering gains against Dollar, Swiss Franc, and Canadian Dollar, but falling short against other major counterparts. A significant focal point will be EUR/GBP’s response to the ECB’s decisions.
Decisive break of 0.8577 resistance and sustained trading above 55 D EMA (now at 0.8571) will argue that fall from 0.8764 has completed at 0.8497, after successfully defending 0.8491 medium term support (2023 low). In this case, near term outlook will be turned bullish for stronger rise back towards 0.8713/8764 resistance zone.
