ECB holds rates as expected, Euro steady

[Redator]

The euro is showing limited movement on Thursday. In the North American session, EUR/USD is trading at 1.1763, down 0.03% on the day. Earlier, the euro climbed to a high of 1.1788, its highest level since July 7.

ECB stays on the sidelines, cites trade tension uncertainty

The European Central Bank's decision to maintain the key deposit rate at 2.0% was significant but not a surprise. With the hold, the ECB ended a streak of lowering rates at seven consecutive meetings. The ECB has been aggressive, chopping 250 basis points in just over a year.

The ECB statement said that inflation was falling in line with the Bank's forecasts and that future rate decisions would be data dependent. President Lagarde has said that the easing cycle is almost down, but the markets are expecting at least one more rate cut before the end of the year.

Is an EU-US trade agreement around the corner?

The European Union and the United States are locked in negotiations over tariffs, with hopes that an agreement can be reached, on the heels of the US-Japan deal earlier this week. US President Trump has threatened to hit the EU with 30% tariffs if a deal is not made by August 1, but there are signals that the sides will agree to 15% tariffs on European imports, as was the case in the US-Japan agreement.

If an agreement is reached, it will greatly reduce the uncertainty around tariffs and will make it easier for the ECB to lower rates and make more accurate forecasts for inflation and growth.

US services accelerate, manufacturing contracts

In the US, Services PMI rose to 55.2 in July, up from 52.9 in June and above the market estimate of 53.0. This pointed to strong expansion and marked the fastest pace of growth in seven months. Manufacturing headed the opposite direction, falling from 52.6 in June, a 37-month high, to 49.5. This was the first contraction since December, with new orders and employment falling.

EUR/USD Technical

• EUR/USD is testing resistance at 1.1771. Above, there is resistance at 1.1781
• 1.1753 and 1.1743 are the next support levels

EURUSD 4-Hour Chart, July 24, 2024

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