European Central Bank President Christine Lagarde declined to give a timeline for interest rate cuts but emphasized that wage data will be vital in deciding when to begin monetary easing.
The comments suggest a first reduction in borrowing costs will only be feasible toward mid-2024 — later than the April meeting.
“We are not there yet” on inflation, Lagarde told CNN in an interview broadcast Tuesday. “We need all sorts of data, but one of which is critically important — it’s the data concerning wages.”
Lagarde’s colleagues have been sending mixed signals on when the first rate cut is likely to come, with some leaving the door open to a move before June. French central bank chief Francois Villeroy de Galhau said at the weekend that “regarding the exact date, not one is excluded, and everything will be open at our next meetings.”
It will all depend on when the ECB is convinced that inflation is really back to 2% after rising last month. Data due Thursday will reveal whether consumer-price growth resumed its downward trajectory in January. For the most important indicator, consumer price index (year-on-year), analysts see a slowdown to 2.8% from 2.9%.
National figures from Spain earlier Tuesday showed a surprise acceleration to 3.5%. Readings for France and Germany are scheduled for Wednesday.
In terms of technical analysis on EURUSD, the level of the previous local low of 1.0720 is of particular interest. In case of a low inflation report, the currency pair may update this minimum.
The overall recommendation is to sell EURUSD, provided that tomorrow's consumer price indexes are not worse than forecasted estimates.
Profit should be taken at the level of 1.0720.
A loss on EURUSD sale should be fixed at the level of 1.0920.