The euro was relatively steady today ahead of today’s ECB rate decision.
Markets are pricing a 25 basis point cut as the eurozone growth has weakened and inflation shows signs of stabilisation near the ECB’s 2% target.
However, the pace of future rate cuts raises debates among policymakers as concerns about recession risks mount.
The potential rate cut is likely to weigh on the euro, as lower interest rates could reduce the currency’s attractiveness to investors seeking higher returns. Despite the imminent rate cut, European bond yields ticked higher in the early session. However, they could return to the downside after the ECB decision, in particular if the central bank hints at more rate cuts.
Additionally, data coming out of the U.S. could impact the euro and European bond yields. Right after the ECB interest rate decision, market participants will focus on the U.S. PPI, which is expected to remain unchanged in August at 0.1% month-on-month. Lower-than-expected figures could weigh on the greenback and provide some support to the euro.
