Euro under pressure ahead of ECB policy meeting

The Euro-dollar currency pair is exhibiting weakness near 1.0850 on Thursday, as the EURUSD faces sharp selling pressure ahead of the European Central Bank’s interest rate decision.

Traders expect the ECB to reduce its Rate on Deposit Facility further by 49 basis points (bps) in the remaining two meetings this year, according to a note from Citi on Tuesday, suggesting that there will be two rate cuts of 25 bps on Thursday and in December.

A quarter-to-a-percentage rate cut on Thursday will be the second in a row, pushing the deposit facility rate lower to 3.25%. A dovish decision from the ECB is widely anticipated as the Eurozone economy appears to be on the path of a slowdown, with price pressures seeming under control.

With high confidence in the ECB to reduce interest rates again, investors will pay close attention to the monetary policy statement and ECB President Christine Lagarde’s press conference to get fresh cues about the likely monetary policy action in December.

Lagarde is expected to talk more about reviving economic growth as the Eurozone Harmonized Index of Consumer Prices (HICP) decelerated to 1.8% in September, according to flash estimates.

The latest economic projections from the German economic ministry showed that Europe’s biggest economy is expected to conclude the year with a decline in the overall output by 0.2%.

EURUSD chart by TradingView