EUR – Dollar on the defensive as ECB minutes suggest no rush for rate cuts

The dollar continued to be pressured on Thursday as investors bet on further monetary easing under pressure from U.S. President Trump's calls for rate cuts. Weak liquidity in U.S. markets due to Thanksgiving holiday exacerbated trading volatility. Meanwhile, the market is focused on negotiations for a potential peace agreement in Ukraine, which could boost the euro. Russian President Putin stated on Thursday that the draft peace plan discussed between the US and Ukraine could form the basis for a future agreement to end the conflict in Ukraine, but Russia will continue fighting if no agreement is reached.

The euro held steady against the dollar this week, with investors pricing in a stark contrast to the ECB's expectations of a series of rate cuts by the Federal Reserve over the next year. The minutes released on Thursday showed that the ECB kept interest rates unchanged at its meeting at the end of October, believing policy was in a "good position" as the economy showed resilience and inflation remained firmly at its target level. This helped bolster investor confidence that there would be no further rate cuts this year, with the market currently seeing only a one-in-three chance of further easing in 2026; on the other hand, the market currently expects the Federal Reserve to cut rates by more than 90 basis points over the next year and a half.

As seen in the technical charts, current trendline resistance is at 1.1630, and the November 13 high of 1.1655. A break above this level could see the euro resume its upward trend. Major upside resistance is expected at 1.1720 and 1.1800, with the next level targeting 1.20. On the downside, initial support is seen at the November 5 low of 1.1468, followed by support at the 1.14 level. A further break below this level would likely lead to more significant downward pressure on the euro. Major supporting levels then lie at 1.1310 and 1.12.

Forecasted range:
Resistance 1.1630/55 - 1.1720 – 1.1800 – 1.2000*
Support 1.1468 - 1.1400* – 1.1310 – 1.1200

News summary:

24/11
Germany's November IFO Business Climate Index was 88.1
Germany's November IFO Business Current Situation Index was 85.6
Germany's November IFO Business Expectations Index was 90.6

ECB Governing Council member Nagel warned that food and service prices continue to rise rapidly and stubbornly

25/11
Germany's Q3 GDP confirmed flat compared to the previous quarter
Germany's Q3 GDP confirmed to have grown by 0.3% year-on-year

26/11
ECB Chief Economist Lane: ECB still needs to see a slowdown in non-energy inflation to ensure the 2% target

27/ 11 Meeting Minutes: ECB Policymakers in No Hurry to Cut Rates, Discussing Whether the Rate Cut Cycle Has Ended

ECB Governing Council member Kassacs believes the time is not yet ripe for a rate cut.

Eurozone November Consumer Inflation Expectations Index: 23.1
Eurozone November Economic Sentiment Index: 97.0
Eurozone November Industrial Sentiment Index: -9.3
Eurozone November Consumer Confidence Index: -14.2

Focus:

Friday
Germany October Real Retail Sales, October Import Prices (15:00)
France Q3 GDP Final, November HICP Preliminary (15:45)
Germany November Unemployment Change and Unemployment Rate (16:55)
Germany November HICP Preliminary (21:00)

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