Euro under pressure from the ECB

Euro fell in European trade on Thursday against a basket of major rivals, extending losses for the second day against the dollar, and plumbing two-week lows amid concerns about the widening policy gap between Europe and the US. 

The European Central Bank is expected to hold interest rates today at the highest since 2001 for the fifth meeting in a row, while providing more clues on the future of interest rates.

Prices 

EUR/USD fell 0.15% to 1.0727, the lowest since April 2, with a session-high at 1.0748. 

The pair lost 1.05% yesterday, the largest loss since April 2023.

The losses accelerated after scorching US inflation data, which reduced the odds of a June Fed interest rate cut. 

Interest Rate Gap

The current Europe-US interest rate gap stands at 100 basis points, and could widen to 125 basis points in June in favor of the US in case the ECB moved with an interest rate cut and the Fed didn’t.

The ECB 

The ECB is holding its policy meeting today, widely expected to maintain interest rates unchanged at 4.5% , already the highest since 23 years. 

The ECB said following the latest March meeting that current interest rates will help bring prices towards the 2% inflation target. 

ECB President Christine Lagarde said back then that inflation showed signs of slowing down, but the ECB isn’t confident yet about easing policies. 

However, Lagarde did hint at a potential rate cut in June as new forecasts indicate a 2% inflation rate by 2025.