Euro holds near 2-year lows as ECB prepares for rate cut

The euro traded near $1.05, just above the two-year lows seen in late November, as traders prepare for the ECB’s upcoming monetary policy decision.

Euro holds near 2-year lows as ECB prepares for rate cut

The ECB is widely expected to lower the key deposit rate by 25 basis points for the fourth time, reducing it to 3% on Thursday. Market expectations now foresee a faster pace of easing, with predictions of a quarter-point rate cut at each meeting through June, potentially bringing the benchmark deposit rate to 2%. The Eurozone economy continues to show signs of weakness, further strained by political uncertainty in France and Germany, as well as geopolitical risks following Donald Trump’s election.

ECB's Lagarde warns of potential Eurozone slowdown amid downside risks

Adding to the cautious sentiment, ECB President Christine Lagarde, speaking at a parliamentary hearing, warned of a potential slowdown in Eurozone growth in the coming months, highlighting that downside risks dominate the medium-term outlook.