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11.03.202414:25 Forex Analysis & Reviews: EUR/USD Overview: Euro ticks up

Last week, the ECB left interest rates unchanged as expected. In its new staff projections, the 2024 outlook for GDP, headline inflation, and core inflation was revised down. For 2025, the ECB lowered its forecasts by 0.1 percentage points and 0.2 percentage points for the headline and core indicators, respectively. Core inflation for 2026 was revised down by 0.1 percentage point.

ECB President Christine Lagarde hinted at a rate cut in June but did not rule it out in April. She said that policymakers would have a clearer view of the situation in April and June. Lagarde acknowledged that most indicators of core inflation had further declined. At the same time, she stressed that domestic price pressures remained high, largely "due to strong wage growth." On the other hand, Lagarde noted that wage growth had begun to slow, assuming that companies' margins would absorb some of the increased labor costs.

ECB officials did not discuss rate cuts and a specific pace of future rate changes at the meeting. Lagarde stated that they had just started a discussion on how to dial back their restrictive stance. ECB staff now expects inflation to fall to the 2% target by 2025, but the regulator is not yet confident enough to start cutting interest rates.

Exchange Rates 11.03.2024 analysis

The EUR/USD pair initially fell slightly in reaction to the outcome of the ECB meeting, mainly due to the downward revision of inflation forecasts, but then resumed gains during the press conference. The euro's rally was driven by weak data from the United States, mainly the lower ISM indicators for both sectors and mixed labor market statistics.

On Friday, Eurostat released its revised Q4 GDP data, with all main indicators unchanged, having no impact on the market. Wage growth averaged 4.5% in the fourth quarter, down from 5.1% in the third quarter, but still high considering the inflation target. Accordingly, it can be assumed that the ECB will probably wait for the Q1 data before deciding on a rate cut. This means that a reduction is unlikely before June, which is a positive factor for the European currency.

Speculators' net long bets on the euro increased by $0.7 billion to +$8.5 billion over the reporting week, with market sentiment remaining bullish. The price is above its long-term average and shows no signs of reversing to the downside.

Exchange Rates 11.03.2024 analysis

Although technical analysis signals a possible correction after hitting a local high of 1.0982, the euro has every chance to extend gains. The 1.0890/0900 area will act as support. The 1.1000 mark can be seen as the nearest target. The euro is expected to attempt to consolidate above this level. For now, there are no factors contributing to a confident rally to 1.1140 as new data is needed.

*La presente analisi del mercato ha un carattere esclusivamente informativo e non rappresenta una guida per l`effettuazione di una transazione.

Kuvat Raharjo,
Analytical expert of InstaSpot
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