The countdown to the European Central Bank's interest rate cut, two heavyweight data may trigger a major market

Isabel Schnabel, a member of the European Central Bank's executive board, said the central bank may not raise borrowing costs again in light of last week's consumer price data. Money markets have increased their bets on faster and deeper interest rate cuts.It is almost entirely expected to cut rates by 25 basis points by March and 150 basis points by the end of next year.

She said:"Recent inflation data suggest that further rate hikes are unlikely."

Investors have now fully priced in the April rate cut, and Schnabel did not rule out the possibility of such a move.

"We have to see what happens," she said. "We have been surprised many times on both fronts. So we should be careful when making statements about what will happen in six months."

Just a month ago, after October data also showed slower price growth, Schnabel cautioned that it was too early to rule out another rate hike, but now she sounds more confident about the changing backdrop.

The typically hawkish ECB official said in a report thatEuro zone consumer price growth slows to 2.4%The speech came days later, well below economists' expectations.

Money markets have increased their bets on faster and deeper rate cuts.It is almost entirely expected to cut rates by 25 basis points by March and 150 basis points by the end of next year.

Schnabel is not yet fully convinced that prices are under control, echoing comments by Vice President Luis de Guindos on Monday, warning that "we cannot prematurely declare victory over inflation."

"We still expect an uptick in the coming months," Mr. Schnabel said. "Some fiscal measures and some fundamental effects will be reversed and we cannot rule out new increases in energy or food prices."

The president of the Bundesbank, Joachim Nagel, also made similar remarks.Warning of geopolitical tensions could also exacerbate price pressures.

Policymakers are expected to leave interest rates unchanged for a second time when they meet on December 13-14. They will also present new economic forecasts for the first time, with a range that extends to 2026.

UBS economists led by Reinhard Cluse said in a report on Monday that the European Central Bank may have to downgrade its growth and inflation forecasts for 2023 and 2024.

The ECB currently plans to reinvest maturing bonds from its pandemic emergency portfolio of 1.70 trillion euros (about $1.80 trillion) until the end of 2024.

However, as the economy overcomes the lingering impact of the pandemic and bond cuts generate only gains, some officials have urged a review of that stance.

#Forex Technical Analysis #

EUR/USD fell 0.40% on Monday (4th). After falling 0.06% on Friday, the day closed at $1.08358. EUR/USD rose to a high of $1.08949 before falling to a low of $1.08040.

Going forward, the near-term trend of EUR/USD will depend on the ISM non-manufacturing PMI and the US employment report. The divergence in services activity and price pressures will affect monetary policy expectations.

daily chart

The EUR/USD pair remains above its 50-day and 200-day moving averages, sending a bullish price signal.

A breakout of the $1.09294 resistance level will support EUR/USD to the $1.10 level and the $1.10720 resistance level. However, a fall below the $1.07838 support level and the 50-day moving average will allow the 200-day moving average to function.

The buying pressure at the $1.07838 support level is likely to intensify. The 50-day moving average converges with the support level.

The 14th RSI reading was 51.98, indicating that the EUR/USD pair will return to $1.10 before entering overbought territory.

4 hour chart

The EUR/USD pair is below the 50-day moving average while remaining above the 200-day moving average, reiterating the recent bearish but long-term bullish price signal.

A breakout of the EUR/USD 50-day moving average and the $1.09294 resistance level will lift the bulls to $1.10.

However, a fall in the EUR/USD pair below the 200-day moving average would allow support at $1.07838 to come into play.

The RSI reading on the 4-hour chart, at 31.96, indicates that EUR/USD fell to the $1.08000 mark before entering the oversold zone.

GBP/USD

The UK and US service PMI and US JOLT job vacancies are the focus.

daily chart

GBP/USDIt is still above the 50-day and 200-day moving averages, confirming the bullish price signal.

GBP/USDA return to $1.27000 would support its rise to the $1.28013 resistance level. However,GBP/USDA break below the $1.26,000 mark would allow bears to move above the $1.24410 support level.

The 14-period RSI reading was 61.66, indicating thatGBP/USDIt will return to $1.27 before entering the overbought zone.

4 hour chart

GBP/USDLocated above the 50-day and 200-day moving averages, the bullish price signal is reiterated.

GBP/USDA return to $1.27000 would support its move to the $1.28013 resistance level. However, a fall below the 50-day moving average would allow the $1.24410 support level to come into play.

The RSI reading on the 4-hour chart is 46.51, indicating thatGBP/USDIt fell below the $1.26 mark before entering the oversold zone.