ECB In Focus This Week

EUR Traders Brace For ECBThe Euro is looking a little soft as we kick off ECB week. The bank is widely expected to offer further pushback against those calling for near-term ECB rate-cuts. Towards the end of last year, the market moved to fully price in an ECB rate cut for April in line with falling inflation and the view that the eurozone economy was quickly headed for recession in 2024. This view was strengthened by an apparent dovish shift in ECB language with many policymakers voicing support for cuts.ECB Pushes BackHowever, with the fall in inflation losing momentum recently and indicators holding up a little better than expected, traders are now scaling back their rate-cut expectations. Additionally, many at the ECB have been quite clear in pushing back against rate-cut expectations recently. Just last week we heard ECB’s Lagarde and Knott warning that the ECB has ample time to move out of restrictive territory in rates this year.Inflation Still KeyLooking ahead to Thursday’s meeting, should the bank take a firmer stance on pushing back against rate-cut expectations, this is likely to underpin EUR near-term. The key for EUR near-term will be the path of inflation. After ticking back up in December, traders will be looking to see whether this marks a trend over January or proves to be a temporary blip.Technical ViewsEURUSDFor now, the market remains below the 1.0937 level following the correction lower from the failure at 1.1126. While below here, risks are skewed towards a test of the 1.0785 level next, in line with bearish momentum studies readings.