EUR/USD: Euro Eyes $1.11 After ECB Cuts Rates to 3.5%, US Dollar Retreats Broadly

Eurozone inflation has been coming down from its multi-year highs, allowing the ECB to cut rates for the second time this year.

• The EURUSD pair advanced toward the $1.11 mark after the European Central Bank on Thursday lowered interest rates by 25bps to 3.5%. The move, backed by continuously receding inflation pressures, was the second trim to borrowing costs on the old continent this year and it also strengthened the narrative of central banks reducing rates. The US dollar, on the other hand, gave up some ground in anticipation of the Federal Reserve’s rate-setting meeting on September 18.
• ”Labor cost pressures are moderating, and profits are partially buffering the impact of higher wages on inflation,” the ECB said on Thursday. “Financing conditions remain restrictive, and economic activity is still subdued, reflecting weak private consumption and investment.” Inflation data, according to the consumer price index for August, slipped further to a three-year low of 2.2%, moving closer to the central bank’s 2% target.
• The single European currency has been zig-zagging around the $1.11 level for a while. It peaked at a 2024 high of $1.12, pumping more than 5% from its 2024 low of $1.0600. Looking ahead, no big reports are on deck for the day, allowing technical analysts to go wild in their search for inverted giraffe necks, yawning sloths, spaghetti whips and flamingo dips (DYOR: these are made up!)