• EUR/USD trades below 1.0900 ahead of the ECB’s monetary policy announcement.
• The ECB is expected to announce a rate cut by 25 bps for the first time in five years.
• The US NFP will significantly influence market speculation for the Fed rate cut in September.

EUR/USD rises in Thursday’s European session but remains broadly sideways below the round-level resistance of 1.0900. The major currency pair is expected to remain quiet ahead of the European Central Bank’s (ECB) monetary policy decision, which will be announced at 12:15 GMT.

The monetary policy decision is expected to deliver changes in the Eurozone’s economic prospects and the Euro’s next move even though ECB policymakers have already communicated their intention to cut the Deposit Facility Rate by 25 basis points (bps) to 3.75%. However, they have been reluctant to suggest a specific policy path beyond June as the battle against inflation has not won yet.

The last mile in the price index returning to the central bank’s desired rate of 2% appears to be stickier than expected due to stubbornly higher service inflation, which is significantly influenced by wage growth, and improved Eurozone’s economic outlook. Service inflation rose to 4.1% in May, the highest in seven months. The Gross Domestic Product (GDP) grew at a higher pace of 0.3% after contracting consecutively for last two quarters of 2023.

Over the interest rate outlook, ECB officials are not expected to commit to any subsequent rate-cut move in July or any other meeting and will remain data-dependent. Currently, financial markets expect the ECB to deliver two more rate cuts this year.