EUR declined against other major currencies in the European session on Monday as investors prepared for the European Central Bank’s policy meeting later this week.
The ECB’s policymakers will gather in Frankfurt on Thursday, January 25, to decide on policy path. Markets do not expect any changes in interest rates to be approved at the gathering. However, they will scrutinize the ECB’s policy statements and the comments of its president Lagarde for signals of when it might start interest rate cutting.
In recent days, the ECB’s rate-setters have continued to indicate that it is too early to discuss rate reductions, highlighting the need to see first compelling evidence that inflation is solidly on a downward path. Despite the policymakers’ warnings, markets are pricing in 135 basis points of rate decreases by the ECB in 2024, with the first move expected in April.