EUR fell against most of its major rivals in the European session on Thursday as investors waited for the announcement of the European Central Bank’s rate decision later in the day.
Expectations are for the ECB to keep its three key interest rates unchanged when it unveils its latest decision on monetary policy at 12:45 GMT. In addition, the central bank for the Eurozone is anticipated to acknowledge a significant deceleration in the region’s inflation, softening conditions in its labour market and overall weakness in the economy as well as highlight a data-dependent approach to policy decisions. However, the major point of interest for investors will be whether the ECB and/or its president Christine Lagarde will more explicitly signal a potential rate cut in June - likely, three months ahead of a similar move by the Federal Reserve.
Markets revised their Fed rate cuts forecast noticeably on Wednesday after a hotter-than-expected March inflation report. They now are pricing in only a 17.0% probability of a rate cut at the June meeting compared to 57.4% on Tuesday, according to the CME FedWatch Tool. The Fed’s September meeting is now seen as the most likely period for a rate reduction - the probability of the move is estimated at 69.7%.