The European Central Bank (ECB) is anticipated to announce a fourth consecutive interest rate cut, marking another 25 basis points (bps) reduction. This adjustment is expected to lower the benchmark rate on deposit facilities from 3% to 2.75%. Scheduled for Thursday, this decision comes in the wake of prior cuts implemented in September, October, and December of 2024. The ECB's unwavering focus remains on supporting economic activity within the eurozone, which continues to grapple with stagnation.
The economic landscape in the eurozone has shown consistent signs of stagnation, prompting the ECB's Governing Council to prioritize measures aimed at revitalizing growth. Recent data reflect an economy entrenched in stagnation, reinforcing the need for continued monetary easing. This proactive approach underscores the ECB's commitment to fostering a more dynamic economic environment in the common bloc.
Ahead of the ECB's policy announcements, investors and traders exhibit caution, refraining from taking large positions. The uncertainty surrounding these decisions has led to restrained market activity, particularly affecting the EUR/USD and GBP/USD pairs. On Thursday, the EUR/USD struggled to gain momentum, moving within a narrow range slightly above 1.0400. Similarly, the GBP/USD held its ground below 1.2450 during the early European session.
The cautious market sentiment is further compounded by renewed US Dollar buying and anticipation surrounding the upcoming release of the US Q4 advance GDP data. This environment has contributed to the subdued performance of major currency pairs, with traders opting for a wait-and-see approach.