Easing inflationary pressures on European monetary policymakers
The European Central Bank is preparing to keep interest rates unchanged.
The market is awaiting strong clues about the path of European interest rates.
The euro fell in the European market on Thursday against a basket of global currencies, continuing its losses for the second day in a row against the US dollar, and is close to touching its lowest level in two weeks, due to the easing of inflationary pressures on monetary policymakers at the European Central Bank, which revived the prospects of a cut in European interest rates at least once this year.
The European Central Bank concludes its first monetary policy meeting of 2026 later today, with expectations that interest rates will remain unchanged for the fifth consecutive meeting. The anticipated statement is expected to provide further clues and clarifications regarding the future path of interest rates this year.
Price overview
Euro exchange rate today: The euro fell against the dollar by 0.2% to ($1.1783), from today’s opening price of ($1.1807), and recorded a high of ($1.1808).
The euro ended Wednesday's trading down 0.1% against the dollar, resuming losses that had paused the previous day as part of a recovery from a two-week low of $1.1776.
Inflation in Europe
Official data released yesterday showed that core inflation levels in Europe continued to decline, indicating that inflationary pressures on monetary policymakers at the European Central Bank are easing.
The overall consumer price index rose 1.7% year-on-year in January, the slowest pace since September 2024, in line with market expectations of a 1.7% increase. The index rose 1.9% in December.
The core consumer price index rose 2.2% in January, the slowest pace since October 2021, below market expectations of a 2.3% increase. The index rose 2.3% in December.
European interest rate
Following the above data, the money market pricing of the probability of the European Central Bank cutting European interest rates by about 25 basis points next March rose from 25% to 35%.
Traders have revised their expectations from the European Central Bank keeping interest rates steady throughout this year to at least one cut of around 25 basis points.
The European Central Bank (ECB) concludes its first regular monetary policy meeting of 2026 later today, with expectations that interest rates will remain unchanged. The upcoming statement is expected to provide further clues and clarifications regarding the future path of interest rates throughout the year.
Expectations are currently stable that European interest rates will remain unchanged at 2.15%, the lowest level since October 2022, for the fifth consecutive meeting.
The European interest rate decision and monetary policy statement will be released by 13:15 GMT, and European Central Bank President Christine Lagarde will speak at the press conference by 13:45 GMT.
Euro performance forecast
Here at FX News Today, we predict: If the European Central Bank’s comments come in less aggressive than expected by the markets, the chances of a European interest rate cut this year will increase, leading to further downward pressure on the euro’s exchange rate against a basket of global currencies.
