The euro is standing still on Thursday before the European Central Bank’s (ECB) decision during the day on a possible third cut in interest rates, already largely priced in by the market, while gold climbs to a new peak. Around 11:20 a.m. GMT (1:20 p.m. in Paris), the euro appears almost stable (at +0.03%) against the greenback, at 1.0866 dollars per euro, after falling earlier in the session to a new plus low since the beginning of August, at 1.0849 dollars. The single currency also drops 0.13% to the pound, to 83.50 pence for the euro. The market expects the European monetary institution to make a further quarter-point cut in its key rate on Thursday, after those of June and September.
The outcome of this meeting seems inevitable for Kathleen Brooks, of XTB, while “many eurozone economies have extremely low levels of inflation”. In the euro zone itself, inflation continued to slow in September, falling to 1.7% year-on-year, according to a figure revised Thursday by Eurostat, for the first time in more than three years below the target of 2% established by the ECB. “The market has fully priced in just over two 0.25 percentage point rate cuts from the ECB by the end of the year”notes Kathleen Brooks. The analyst believes that“an accommodating orientation” in Thursday’s decision “could further exacerbate the downward dynamics of the euro”.
Deutsche Bank analysts also consider that a new cut on Thursday “would signal a pivot towards faster monetary easing, as it would be the first consecutive decline of the cycle”. Forex traders will also keep an eye on American indices published on Thursday: retail sales, then industrial production in September. Furthermore, the price of gold soared to a new peak on Thursday, at $2,688.83 per ounce, surpassing its previous record at the end of September. As a safe haven, the yellow metal benefits “the prospect of interest rate cuts by major central banks, global economic uncertainty and geopolitical risks, including the unpredictable outcome of the US presidential election”explains Ricardo Evangelista, analyst at ActivTrades.
