The EUR/USD pair dropped to a ten-week low on Wednesday, trading near critical support levels as investors brace for the upcoming European Central Bank (ECB) rate decision. The euro has come under pressure amid growing uncertainty over the central bank’s next policy move, with market participants split on whether the ECB will pause or continue with its rate-hiking cycle.
The pair’s slide reflects broader concerns about the eurozone’s economic outlook. Weak data out of the eurozone, including slowing growth and rising inflation, has complicated the ECB’s decision-making process. Some analysts suggest that the ECB may opt for a cautious approach, particularly as signs of economic fragility become more pronounced.
Meanwhile, the US dollar remains firm, buoyed by expectations that the Federal Reserve will maintain its hawkish stance, further widening the policy divergence between the Fed and the ECB. This has added additional downward pressure on the euro, as the interest rate differential continues to favor the greenback.
As the ECB rate call looms, traders are positioning cautiously, with many expecting volatility in the wake of the decision. A dovish signal from the ECB could push the EUR/USD lower, potentially breaking through key support levels. On the other hand, any hints of further tightening could offer the euro some relief, though the overall outlook remains clouded by economic uncertainty.
