EUR/USD Analysis: Will the European Central Bank Change its Policy? – 30 January 2025

-- As widely expected, the US Federal Reserve kept US interest rates unchanged.
-- This event did not significantly alter the performance of the EUR/USD currency pair, which remained stable within a range between the support level of 1.0383 and the resistance level of 1.0443, before settling around 1.0415 at the time of writing this analysis.
-- This is ahead of the next important announcement for the currency pair, as the European Central Bank will announce today an update to its monetary policy.

A look at the US central bank decisions

According to the official announcement, the Federal Open Market Committee (FOMC) unanimously voted to keep the US interest rate in a target range between 4.25% and 4.5%. At the same time, the bank's policy statement removed the language indicating that labour market conditions had generally improved, stating instead that "the unemployment rate has stabilized at a low level" and that "labour market conditions remain strong."

The statement also removed the reference to the ongoing progress towards the 2% inflation target set by officials, noting that "inflation remains somewhat elevated." The statement retained the language stating that the risks to achieving employment and inflation goals are "roughly balanced." The statement also retained the language stating that "in determining the extent and timing of additional adjustments" to rates, officials will assess incoming economic data and evolving outlooks and the balance of risks.

Ahead of the announcement, several policymakers had said they expected fewer rate cuts this year after data showed the U.S. economy was on solid ground and inflation was firmer than expected. December data for the Fed’s preferred inflation measure, the personal consumption expenditures price index, is due out Friday.

However, after a series of surprising data and uncertainty about how the US economy will respond to a range of bold new policies from Trump on trade, taxes, immigration and regulation, officials are unlikely to commit to any particular rate path.

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Trading Tips:

The EUR/USD rebound attempts may remain limited for a while, so be careful and keep a close eye on the factors affecting the EUR/USD performance.

What to expect from the European Central Bank today?

The next major event for the EUR/USD pair this week is the European Central Bank policy announcement later today. As for expectations, the European Central Bank is expected to cut interest rates for a fifth meeting as inflation nearing its 2% target allows officials to further ease restrictions on the economy.

Meanwhile, analysts surveyed by Bloomberg are unanimous in expecting a quarter-point cut in the deposit rate, to 2.75%. Also, the most do not expect ECB President Christine Lagarde to formally commit to the next steps, even as several of her fellow board members have indicated that another cut is likely to follow in March.

The hope is that the looser monetary policy will breathe life into an economy that has struggled to grow, especially as political friction irks consumers and businesses in the euro zone’s two largest members. The push comes even as the Federal Reserve is less keen to lower borrowing costs. Global central banks are concerned about U.S. President Donald Trump’s economic plans, with ECB policymakers balancing warnings that greater global trade pressures could dampen exports with lingering concerns about service prices rising to double the 2% target.

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EUR/USD Technical Analysis Today:

According to what is observed on the performance of the EUR/USD currency pair, the general trend is still downward, and according to the performance on the daily chart, rebound attempts upwards are still weak and prone to rapid collapse, as we predicted before. Furthermore, we confirm this view until investor confidence returns in the recovery of the Eurozone and fears of Trump's trade wars recede. In general, breaking the general downward trend of the euro-dollar requires first moving towards the resistance levels of 1.0560 and 1.0630, respectively. Currently, the direction of the Relative Strength Index is still bearish, and the Stochastic Oscillator is in the beginning of a limited upward shift.

On the other hand, and over the same period of time, if the bears return the Euro Dollar pair to the perimeter and below the support level of 1.0330, this will end hopes of rebounding upwards, and the bears will begin a stronger downward journey.

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Original Source DailyForex.com provides daily fundamental and technical analysis and signals for those looking to trade based on trends in the currency markets.