The EUR/USD currency pair traded 0.15% higher, reaching near 1.1470 in the early European session on Thursday, as the Euro strengthened against most major currencies except the antipodeans ahead of the European Central Bank’s (ECB) monetary policy announcement scheduled for 13:15 GMT [1]. According to the latest heat map, the Euro was the strongest against the US Dollar, reflecting a 0.15% gain, and also posted gains against the British Pound (0.06%), Canadian Dollar (0.12%), and Swiss Franc (0.07%) [1].
Market participants widely anticipate that the ECB will leave interest rates unchanged, maintaining the Rate on Deposit Facility at 2% and the Main Refinancing Operations Rate at 2.15% for the sixth consecutive meeting. This expectation is based on recent statements from ECB officials, who have discouraged the need for any monetary policy adjustment, citing inflationary pressures in the Eurozone remaining close to the central bank’s 2% target over a medium period [1].
Analysts at Commerzbank expect ECB President Christine Lagarde to deliver a hawkish tone in her monetary policy outlook, especially as rising oil prices due to Middle East conflicts have de-anchored inflation expectations globally. Commerzbank’s report indicates that traders have fully priced in the first interest rate hike by September and see a 50% chance of another move by year-end [1].
Meanwhile, the US Dollar Index (DXY) was steady around 100.20, holding onto gains from Wednesday after the Federal Reserve left interest rates unchanged in the 3.50%-3.75% range. The Fed signaled that rate cuts are not appropriate as progress toward the 2% inflation target has stalled, with Chair Jerome Powell stating, "If inflation progress stalls, rate cuts will not follow" [1].
CONCLUSION
The EUR/USD pair’s modest rise reflects market anticipation of a steady ECB policy stance, with analysts expecting hawkish signals from President Lagarde amid global inflation concerns. Traders are pricing in potential rate hikes later in the year, while the US Dollar remains firm following the Fed’s unchanged policy and cautious outlook on rate cuts.