Euro fell in European trade on Friday against a basket of major rivals, falling off two-week high against the dollar on profit-taking, as investors shun risks ahead of major European data for December.
The common currency is heading for a weekly profit on hopes the current gap of US-European interest rates will diminish soon.
EUR/USD
EUR/USD fell 0.15% to 1.0977, with a session-high at 1.1004, after rallying 1.1% on Thursday, the fourth profit in a row, and the largest since mid-November, scaling one-week high at 1.1009.
Major Sectors
Investors a batch of crucial European data later today to gauge the performance of the euro zone economy in the fourth quarter.
The euro zone economy experienced a heavy contraction in the third quarter due to lower consumer spending, and a slowing Chinese economy.
Weekly Trades
Euro is up 2% so far this week against the dollar, on track for the first weekly profit in three weeks, and the largest since July.
ECB
As expected, the European Central Bank voted to maintain interest rates unchanged at 4.5% this week, already the highest in 22 years.
The ECB said that while inflation has receded in recent months, it could rebound again in the short term.
The ECB will hold onto current interest rate levels until inflation is brought back towards 2%.
It asserted that policy decisions will rely on upcoming data and inflation dynamics in upcoming months.
ECB President Christine Lagarde said the time is still not right to talk about cutting interest rates as inflation is still not consistently moving lower.
She added the ECB needs to monitor further data on wages and prices before taking new policy decisions.
European Rate Outlook
Following the meeting, the markets reduced the odds for interest rate cuts expected in the euro zone next year from 160 basis points to less than 150 basis points.
Interest Rate Gap
The current European-US interest rate gap stood at 100 basis points, the lowest since May 2022, and is expected to shrink further in March 2024 when the Federal Reserve is expected to issue its first interest rate cut.
The ECB's position this week was more bullish than expected, reducing the odds for European interest rate cuts during the first half of 2024.
Conversely, the Fed openly started discussions about the next interest rate cut, with markets betting on the March meeting as the timing of the first such cut.
Disclaimer: The copyright of this article belongs to the original author. Reposting this article is solely for the purpose of information dissemination and does not constitute any investment advice. If there is any infringement, please contact us immediately. We will make corrections or deletions as necessary. Thank you.
