ECB talking points drag Euro lower as investors rebalance their positions

The Euro declines versus the majority of its major currency peers as most Euro investors adjusted their position. Both the Federal Reserve and the European Central Bank have made a major verbal effort to dampen market expectations for a faster rate-cutting pace.

Both European and American policymakers issue a warning, stating that rate-cutting moves will be data-dependent and happen considerably more slowly than the money markets are anticipating.

European inflation could take until 2025 to reach 2%, and the ECB wants wage growth to be much slower before moving on rates. ECB Monetary Policy Accounts reveal concerns that inflation will continue to pick back up in the near term, with recent fall in inflation being encouraging but ECB policymakers remain unconvinced that progress is permanent.

The ECB expects to maintain restrictive policy stance “for some time” and market repricing could derail the disinflation process. A broad adjustment in rate cut expectations is underway as Fed officials continue to talk down rate cut hopes.

US economic data continues to outpace market forecasts, with initial jobless claims for the week ending January 12 slowing more than expected to 187K versus forecast for 207K, down even further from previous week’s 203K.

ECB President Christine Lagarde made her second of three appearances at the World Economic Forum in Davos, Switzerland, discussing little monetary policy. The Euro is backsliding, and EUR/USD struggles to find footing below 1.0900.

The worst case scenario, according to Fed’s Bostic, would be to reduce and then raise inflation once more, but additional proof that it is headed towards 2% would be needed. US economic data keeps rising above expectations in the markets. Initial Jobless Claims for the week ending January 12 fall short of expectations, totaling 187K as opposed to the projected 207K, and are even lower than the 203K recorded the week before.

Christine Lagarde, the president of the European Central Bank, attended the World Economic Forum in Davos, Switzerland, on Thursday, marking her second of three public appearances. Lagarde hasn’t talked much about monetary policy, but she will make one more appearance on Friday at 10:00 GMT.