ECB Poised for Another Rate Cut Amid Inflation Easing and Trade Tensions

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The European Central Bank (ECB) is set to announce its April interest rate decision at 12:15 GMT on Thursday, with markets widely expecting a sixth consecutive rate cut. ECB President Christine Lagarde will hold a press conference at 12:45 GMT to discuss the policy decision and respond to media questions.

The Euro (EUR) is expected to react significantly to the ECB’s announcement against the US Dollar (USD). The central bank is expected to reduce the benchmark deposit rate by 25 basis points, bringing it down to 2.25% from 2.5%, with inflationary pressures continuing to subside.

Eurostat data revealed that the Eurozone's Harmonized Index of Consumer Prices (HICP) rose by 2.2% year-over-year (YoY) in March, slightly lower than February’s 2.3% increase. Core HICP inflation also softened to 2.4% from 2.6%.

Investors will be closely watching the ECB’s policy statement for insights on how US trade policies may affect the Eurozone’s inflation outlook and growth. TD Securities analysts expect a 25 bps rate cut and suggest the press conference will focus on global economic uncertainty, particularly regarding trade policies and demand.

Earlier in the month, ECB Governing Council member Gediminas Šimkus argued that the US tariffs warranted a more accommodative monetary stance. Though the EU and US agreed to a 90-day pause on tariffs, uncertainties remain about future EU-US trade relations. Despite this, EUR/USD has surged by more than 4% in March and gained around 5% since the beginning of April, partly due to US Dollar weakness amid fears of an economic downturn from escalating trade tensions.

If the ECB’s statement or Lagarde’s remarks express confidence in the disinflation process despite tariff uncertainty, investors may expect further policy easing, potentially leading to a sell-off in the Euro. Conversely, if the ECB signals concerns about inflation risks and hints at a pause in rate cuts, the Euro could continue to outperform the Dollar.

From a technical standpoint, FXStreet’s Eren Sengezer notes that EUR/USD is near the upper boundary of a two-month ascending regression channel, with the Relative Strength Index (RSI) above 70, suggesting a potential technical correction before further gains. Key support is at 1.1200, with additional support at 1.1100 and 1.1000. Resistance levels include 1.1435, 1.1500, and 1.1580.

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