EUR/USD rises as ECB interest-rate decision looms

• EUR/USD moves higher around 1.0520 with investors focusing on the ECB’s monetary policy decision at 13:15 GMT.
• The ECB is almost certain to cut its Deposit Facility rate by 25 bps to 3%.
• No surprise in the US CPI data cemented Fed rate cut bets for next week’s meeting.

EUR/USD gains sharply around 1.0520 in Thursday’s European session ahead of the European Central Bank’s (ECB) interest rate decision, which will be announced at 13:15 GMT. The ECB is widely anticipated to cut its Deposit Facility rate by 25 basis points (bps) to 3% as Eurozone price pressures seem under control and the economy continues to deteriorate. This would be the third straight interest rate cut by the ECB in a row and the fourth of the year.

Therefore, investors will pay close attention to the interest rate guidance from ECB President Christine Lagarde at the press conference after the policy decision to be held at 13:45 GMT. 

"Fundamentals fully justify the December cut and more dovish forward guidance, given the deterioration in the growth picture. Underlying inflationary pressures have eased and risks of further headwinds to growth have increased after the United States (US) election results," Annalisa Piazza at MFS Investment Management said. 

Meanwhile, German Chancellor Olaf Scholz submitted a request for a no-confidence vote on December 16 to the President of the Bundestag, Bärbel Bas, a necessary precursor for holding elections on February 23, 2025, Euronews reported. German government collapsed after Scholz dismissed Finance Minister Christian Lindner, dissolving the three-party coalition.

Daily digest market movers: EUR/USD gains at US Dollar’s expense

• EUR/USD rises as the US Dollar (USD) declines in Thursday’s European session. The US Dollar Index (DXY), which tracks the Greenback value against six major currencies, falls to near 106.40 as US inflation data for November matched expectations, boosting dovish Federal Reserve (Fed) bets. 
• As measured by the Consumer Price Index (CPI), headline inflation accelerated to 2.7% from the prior release of 2.6%, and the core CPI – which excludes volatile food and energy prices – rose steadily by 3.3%.
• US inflation data boosted Federal Reserve (Fed) dovish bets for the policy meeting announcement on Wednesday. According to the CME FedWatch tool, the probability for the Fed to reduce interest rates by 25 bps to 4.25%-4.50% next week has escalated to almost 99%d from 88% on Tuesday.
• In Thursday’s US session, investors will focus on the US Producer Price Index (PPI) data for November and the Initial Jobless Claims data for the week ending December 6.

Technical Analysis: EUR/USD hovers above 1.0500

EUR/USD wobbles above the psychological figure of 1.0500. The outlook of the major currency pair remains bearish as the 20-day EMA near 1.0560 acts as key resistance for the Euro (EUR) bulls.

The 14-day Relative Strength Index (RSI) wobbles near 40.00. Should the RSI fall below this level, a bearish momentum will trigger.

Looking down, the November 22 low of 1.0330 will be a key support. On the flip side, the 50-day EMA near 1.0680 will be the key barrier for the Euro bulls.