Euro falters following ECB rate decision

The euro trended lower on Thursday, following a tepid response to the European Central Bank’s (ECB) latest interest rate decision.

Meanwhile, Sthe pound is struggling to find support at the start of today’s session, with GBP/EUR flat at €1.1721, and GBP/USD dipping to $1.2677. GBP/CAD has stumbled to CA$1.7084, while GBP/AUD and GBP/NZD are subdued at AU$1.9274 and NZ$2.0799, respectively.

Coming up, will a drop in US inflation pull USD exchange rates lower today?

What’s been happening?

The euro stumbled yesterday in the wake of the European Central Bank’s first policy meeting of 2024.

While the ECB kept interest rates on hold as expected, the euro fell as President Christine Lagarde wasn’t as forceful in dispelling rate cut bets as EUR investors had hoped.

Meanwhile, the US dollar fluctuated on Thursday, following the publication of the latest GDP figures.

While a stronger-than-expected expansion in the US economy at the end of 2023 reflected positively on the ‘greenback’, it also bolstered market risk appetite, limiting demand for the safe-haven currency.

Meanwhile, the pound, was subdued during yesterday’s session after the Confederation of British Industry’s (CBI) latest retail sales balance plummeted to a three-year low this month.

What’s coming up?

The end of this week’s session sees the publication of the Federal Reserve’s preferred indicator for inflation, the core PCE price index.

If December’s index reports another drop in inflation, it could stoke Fed rate cut speculation and lead to the US dollar closing the week on a sour note.

In the meantime, the release of Germany’s latest consumer confidence index earlier this morning is dragging on the euro, after reporting morale slumped to an 11-month low.

Finally, in the absence of any notable UK data, movement in the pound may be driven by market risk appetite. Potentially underpinning Sterling if sentiment remains broadly positive.