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Home News EUR/USD Declines for Second Consecutive Day Ahead of ECB Policy Decision

EUR/USD Declines for Second Consecutive Day Ahead of ECB Policy Decision

by Barbara

The EUR/USD pair has continued its downward trajectory on Tuesday, dipping to the 1.0890 region in the last hour, nearing its lowest level since August 8, reached the previous day. Bearish traders are advised to wait for a decisive break below the 200-day Simple Moving Average (SMA) before initiating new positions, particularly in light of the upcoming central bank event risks.

The European Central Bank (ECB) is set to announce its policy decision on Thursday, with expectations of a third interest rate cut during this easing cycle amid growing concerns over sluggish economic growth. Additionally, inflation in the Eurozone has fallen below the ECB’s 2% target for the first time since 2021, further supporting the case for additional policy easing. This development is likely to weaken the euro, compounded by the strengthening US Dollar (USD), which is significantly impacting the EUR/USD pair.

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The USD Index (DXY), which measures the Greenback against a basket of currencies, remains robust near a two-month high due to increasing expectations of a less aggressive approach to policy easing by the Federal Reserve (Fed). Markets have largely discounted the possibility of another significant rate cut by the Fed in November, helping to keep US Treasury bond yields elevated. Furthermore, ongoing geopolitical risks are bolstering the safe-haven dollar, contributing to a further decline in the EUR/USD pair.

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Market participants are now looking ahead to Tuesday’s economic releases, including the German ZEW Economic Sentiment Index and Eurozone Industrial Production data. Later in the North American session, the Empire State Manufacturing Index and remarks from key FOMC members are anticipated to influence USD demand, potentially providing short-term momentum for the EUR/USD pair.

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