• The European Central Bank is to reduce key rates by 25 BPS at a January political meeting.
• The words of President ECB Christine Larde will have the key to offering fresh policy tips.
• ECB policy ads will be expected by shaking the EUR/USD pair and saturating intensive variability.

The decision of the European Central Bank (EBC) will be announced on Thursday at 13:15 GMT after the January monetary policy meeting. Markets provide for another reduction in key rates, which means continuing the gentle cycle after a reduction in the rate in December. Updated staff economic forecasts are not published at this meeting.

President EBC Christine Lagarde will organize a press conference at 13:45 GMT, where he will give a prepared statement on monetary policy and answer media questions. EBC ads probably injection intensive volatility around the euro (EUR) in relation to the US dollar (USD).

What can you expect from the decision of the European Central Bank?

After lowering the key rates in December, the ECB should announce another 25 base points (BPS), collecting a reference rate in a deposit plant from 3% to 2.75%. It would be a fourth reduction in interest rates in a row after cutting them in September, October and December 2024.

At the December conference meeting the ECB Christine Lagarde press conference, she said that “the risk of growth is tilted to the minus”, while “the risk of inflation is now double -sided.”

Speaking about the prospects of inflation and interest in the CNBC interview last week, off the beaten track of the annual meetings of the World Economic Forum (WEF) in Davos, President Lagarde said: “We are convinced by inflation of the euro area during the purpose during the purpose of 2025”, adding that in “gradual movements of the rates come to mind at the moment. “

Preliminary Eurostat data published on January 7 showed that the harmonized consumer price rate (HICP) of the euro area increased by 2.4% year on year (y / y) in December after reporting by 2.2% in November. Data adapted to market forecasts. The annual HICP core inflation remained constant at 2.7% in the same period.

Inflation in the euro area remained increased and slightly moved from the goal of the central bank in December. Economists from ABN Amro noticed that “reflection on the main inflation was powered to a large extent with energy, both with a lower base compared to last year, but also a recent weakness in euros, contributing to higher gasoline prices, as well as higher gas and electricity prices , and Europe works down the gas supply slightly faster than usual this winter. “

Then the bills from the December EBB meeting published on January 16 showed: “There were still many risk for inflation prospects. More checkpoints had to be convinced whether the disinflation remained on the right track and maintained the optional to make corrections along the way. “

Against this background, ECB communication in the political statement and comments of President Lagarde will have the key to determining the scope and date of the next rate reductions, because the bank is fighting the fears of economic growth and potential tariffs on the part of the President of the United States (USA) Donald Trump Administration.

Looking through the ECB meeting, TD Securities analysts said: “This decision should be a fairly simple cut. Inflation data was loud, but in the net touch weaker than expected in December projections. Growth signs do not show any real signs of improvement, adding to a soft background. “We do not expect any real change in news around this, but questions about the neutral rate will probably appear at a press conference,” added analysts.

How can the ECB meeting affect EUR/USD?

As part of the SHOWIDNA EBC, the EUR/USD pair floats near the five -week maximum last Friday by 1.0522. The further position of the pair remains dependent on the prospects of the ECB percentage rates.

It is expected that the President of ECB Christine Lagarde will maintain rhetoric that the bank is not on any specific percentage path and will probably remain dependent on the data. Lagarde can also repeat its view on “gradual movements of the rates”. In this scenario, EUR/USD is set to extend the recovery pace. However, the main pair of currencies could witness the news if Lagarde mentions that a reduction in the 50 BPS rate was discussed as an option at the meeting or expresses concerns about economic perspectives.

Dhwani Mehta, a leading analyst at the Asian session in FxStreet, offers a brief technical perspective for EUR/USD:

“Despite the recent decrease in repair EUR/USD, the steam remains ready for further recovery, because the indicator of the relative force indicator (RSI) managed to defend the level 50 on the daily chart. If buyers recover a 50-day straight movable average (SMA) at 1.0422, EUR/USD may make the next run towards 1,0500. In addition, a six -week maximum of 1,0533 will be questioned. “

“If the minus regains adhesion, immediate support of the 21-day SMA to 1.0355 will be tested. Below this level you can see a new sale by opening the door to a round level 1.0300. The last defense line for EUR/USD buyers is visible at the lowest level of January 17 1.0265. “