• EUR/USD gains at the US Dollar’s expense. The Euro (EUR) exhibits a mixed performance against its major peers amid uncertainty over the European Central Bank’s (ECB) interest rate cut path. The ECB reduced its Rate on Deposit Facility again by 25 basis points (bps) to 3.50% on Thursday, as expected, but stepped back from providing a pre-defined rate-cut path.
• ECB President Christine Lagarde said at the press conference, "The interest rate decisions will be based on its assessment of inflation outlook in light of incoming economic and financial data, dynamics of underlying inflation and strength of monetary policy transmission."
• After the monetary policy announcement, commentaries from ECB officials have added to confidence that the bank’s battle against Eurozone inflation appears to be in the final leg. ECB Governing Council member and Bundesbank President Joachim Nagel said on Friday, "The inflation picture looks very good." Nagel added, "we are now assuming, and the data has shown, that we will reach our inflation target of 2% by the end of the next year."
• Currently, financial market participants expect that the ECB will cut interest rates one more time in the last quarter of the year due to deepening worries over the German economic outlook. Analysts at Nomura said, “The way we think about Germany is that plentiful structural concerns – ranging from the country's greater exposure to China and the global manufacturing cycle, the energy price ‘sticker shock’ still reverberating through the economy, and poor demographic trends (falling population, a rising dependency ratio) – have lowered the bar for any given cyclical downturn to result in recession.”