The EUR/USD rate declines and breaks the level of 1,07

Yesterday's session on Wall Street brought significant increases in the technological Nasdaq Composite index, which gained 1,7%. SP500 also ended the day on a positive note. In turn, Dow Jones prices were flat. The US Treasury yield curve became steeper, driven by an increase at its long end. More Fed representatives spoke out for a cautious and patient approach to interest rate cuts this year. Gold set a new record while the dollar gained slightly. EUR/USD quotations set a new local low at 1,07. The ECB left interest rates unchanged.

Data-dependent ECB

Another decision took place yesterday European Central Bank on interest rates. They remained unchanged. The refinancing rate is still 4,5%. and deposit 4%. President Christine Lagarde announced that the institution will remain data-dependent and does not commit in advance to a specific interest rate path. To some extent, a reduction was signaled in June. Parts of the Governing Council support it easing monetary conditions now, however, the vast majority want to wait for further macro publications that will clarify the picture of the current situation.

The statement showed that the bank notes that most measures of core inflation are easing, wage growth is gradually slowing down and companies are absorbing part of the increase in labor costs in their margins. An important message was one that suggests that it is possible to reduce the restrictiveness of monetary policy provided that the Governing Council's updated assessment of the inflation outlook and the strength of monetary policy transmission further increases its confidence that price growth measures are progressing sustainably towards the target. This sentence can be considered as an announcement of the June change.

The main currency pair is getting lower

At the end of the day, the euro lost a rate of the main currency pair decreased to the round level of 1,0700 and this morning this level is being broken. The attitude of the ECB and the Fed is starting to diverge more and more, the European Central Bank is becoming more dovish, and the Fed has arguments for still being very restrictive. Recently, this divergence has deepened, which is visible in the lower levels of the main currency pair.

Source: Łukasz Zembik, OANDA TMS Brokers