ECB Policy and the Euro's Fragile Recovery

The European Central Bank (ECB) is navigating treacherous waters. The Eurozone's economic recovery remains uneven across member states, yet inflation persists above the target rate. This dilemma was at the forefront of the latest ECB meeting.

President Lagarde's comments highlighted the bank's commitment to data-dependency. While ruling out immediate rate cuts, the door remains open if economic data deteriorates. This cautious stance has left the Euro vulnerable to shifts in market sentiment.

Key Takeaways for EUR/USD

The interest rate differential between the Fed and the ECB continues to be the primary driver for the EUR/USD pair. As long as the Fed maintains a more hawkish stance, any rally in the Euro is likely to be met with selling pressure. Traders are looking for a sustained break above 1.10 to confirm a bullish trend, but resistance remains strong.