Euro hovers above 6-week low against Dollar

Euro hovers: The euro maintained its position just above a six-week low against the US dollar on Thursday, a level it had touched earlier in the week. The currency was marginally up by 0.12 per cent at $1.0899, remaining in proximity to Tuesday's low of $1.0822, which marked its lowest point since mid-December.

Market movements were subdued on Thursday morning as traders awaited crucial events scheduled for later in the day. The European Central Bank (ECB) was set to announce its latest policy decision at 1315 GMT. While expectations leaned towards the ECB keeping rates steady, investors were keenly observing whether President Christine Lagarde would deviate from the anticipated resistance against market expectations of rate cuts as early as April.

Market's current prices

The market is currently pricing based on a projection of 130 basis points of cuts from the ECB in 2024. Lee Hardman, Senior FX Analyst at MUFG, noted that President Lagarde had already signalled a potential rate cut in the summer, and today's ECB policy meeting was likely to be a holding operation with limited impact on the euro's performance.

Following the ECB announcement, the first reading of the US gross domestic product (GDP) for the fourth quarter was scheduled. According to a Reuters poll, expectations were for 2 per cent annualised growth, though estimates varied between 0.8 per cent and 2.8 per cent. A reading at the higher end of the range would still signify a notable slowdown from the previous quarter.

Federal Reserve on watch

Investors are closely watching the Federal Reserve's rate path, with markets currently pricing in a 43 per cent chance of a rate cut in March. The dollar index, which tracks the currency against six peers, has risen about 2 per cent this month. Traders have scaled back expectations for early and deep rate cuts by the Fed, emphasising the resilience of the US economy.

In addition to the ECB and US GDP data, other factors impacting currency movements include the Fed's preferred gauge of inflation, the personal consumption expenditure (PCE) data, scheduled for Friday, and comments from Fed Chair Jerome Powell next week.

Meanwhile, the pound held steady at $1.2732, the Norwegian crown firmed after the country's central bank maintained its benchmark interest rate, and the Canadian dollar remained stable after the Bank of Canada policy meeting. The Japanese yen weakened slightly, with the Bank of Japan's hawkish tilt influencing market sentiment.

The currency markets remain dynamic, with multiple factors influencing the trajectory of major currencies in the near term. Traders are closely monitoring central bank decisions, economic data, and policymakers' comments for insights into the potential future direction of currency pairs.

(with Reuters inputs)