ECB expected to cut the key rate to 3.25% – BBH

EUR/USD is trading heavy below the 200-day moving average (1.0873). The risk is the ECB delivers a dovish 25 bp cut today which can further weigh on EUR, BBH FX analysts note.

Dovish cut today can further weigh on EUR

“The ECB is widely expected to cut the key interest rate 25 bp to 3.25% (1:15pm London) and reiterate that it ‘is not pre-committing to a particular rate path.’

“However, ECB president Christine Lagarde will likely sound dovish during her post-meeting press conference (1:45pm London) because the Eurozone economy is stagnating, and inflation is undershooting the ECB’s 2% target.”

“Market is pricing-in almost 175 bp of easing over the next twelve months that would see the policy rate bottom near 1.75%.”