EUR/USD declines ahead of ECB’s decision

At the time of writing, the EUR/USD pair is down 0.45% in the North American session, to 1.0833, after rising to 1.0915, helped by the Fed’s policy outlook. The Eurozone’s decline in confidence and the ECB’s tighter credit policy impact the euro against the greenback.

Future US GDP estimates and ECB policy decisions will influence EUR/USD under inflationary pressures. A positive sentiment in the market contributed to the EUR/USD’s early trading session 0.12% decline during the North American session. Simultaneously, traders modified their bets on US Federal Reserve (Fed) rate reduction. After reaching a day high of 1.0915 during the European session, the pair traded at 1.0855.

Wall Street’s attitude is indicative of investor optimism, as they appear to be certain that the US economy will escape a recession. The likelihood that the Fed will lower rates in March, however, fell from 63.1% to 38.6% as a result of Fed officials’ announcement last week that it is too soon to loosen policy.

In addition, the ECB’s Bank Lending Survey showed that, as a result of the bank’s higher interest rates, credit has become more restrictive and loan demand has decreased. The ECB survey indicates that banks anticipate a minor uptick in demand for homes and business loans.

On the data front, the EU commission said that the Eurozone Consumer Confidence fell from 15.0 in December to -16.0 in January, below predictions for an increase to -14.3. As the European Central Bank (ECB) announces its monetary policy decision on Thursday, more events are anticipated to upset the apple cart. On the other side of the Atlantic, the US economic docket will release the preliminary GDP estimate for the fourth quarter of 2023 as well as Personal Consumption Expenditures (PCE), the Fed’s favoured inflation indicator.

Technically, sellers would encounter strong support at the 200-day moving average (DMA) at 1.0844, despite the fact that the EUR/USD is once again on the decline. After clearing, the 100-DMA is at 1.0771, and there is still more downside near the 1.0800 mark. However, if investors raise the main to the 1.0900,