The euro experienced a decline against major currencies during the New York session on Thursday, following the European Central Bank’s decision to maintain key interest rates and President Christine Lagarde’s statement that discussing rate cuts at this point was premature.
In the first rate-setting session of the year, the Governing Council left the main refinancing rate (refi) at 4.50 percent. The deposit facility rate remained at a record high of 4.00 percent, and the lending rate was unchanged at 4.75 percent. Market expectations point towards the ECB potentially easing rates by the middle of the year as inflation shows signs of slowing.
The ECB’s forward guidance on interest rates remained unchanged, emphasizing that the current interest rate levels, if maintained sufficiently, will contribute substantially to the goal of returning inflation to the 2 percent target. The central bank stated that future decisions will ensure policy rates remain sufficiently restrictive for as long as necessary.
During the press conference in Frankfurt, Lagarde mentioned, “The consensus around the table of the Governing Council was that it was premature to discuss rate cuts.”
Consequently, the euro weakened to a 2-day low of 1.0830 against the US dollar and an 8-day low of 0.9384 against the Swiss franc. Support for the euro is anticipated around 1.06 against the US dollar and 0.925 against the Swiss franc.
Against the Japanese yen, the euro dropped to 9-day lows of 159.69, and against the Australian dollar, it reached 9-day lows of 1.6428. Potential support levels are expected around 155.00 against the yen and 1.61 against the Aussie.
The euro also declined to an 8-day low of 1.7691 against the New Zealand dollar, with the possibility of further testing support around the 1.74 region.
Against the Canadian dollar, the euro depreciated to 1.4619, reversing from a 1-1/2-month high of 1.4735, and key support is likely around the 1.44 level.
Furthermore, the euro touched a more than 5-month low of 0.8520 against the British pound, signaling a potential downtrend towards support around the 0.84 area.