The European Central Bank (ECB), even though inflation in the eurozone is heading towards the target range, continues to pursue a cautious monetary policy. Gabriel Makhlouf, a member of the Governing Council, stressed that the bank must also consider uncertain global factors that could affect economic development and inflation in its decisions. In this regard, traders and investors are interested in what can be expected from the price of the euro on different forex pairs. And the answer?

Caution above all

The ECB has cut interest rates several times in a row, while Makhlouf did not specify whether this could happen in April. The move suggests that the bank wants to thoroughly evaluate economic data and inflation before making further changes. While the ECB is expected to continue easing monetary policy throughout 2025, the timing and extent of rate cuts remain unclear.

Global risks and their impact

One of the reasons for the ECB's caution is exceptional global events that could have an unpredictable impact on inflation. Although Makhlouf did not specify specific factors, possible risks include geopolitical tensions, volatility in energy prices, the situation in China or developments in the US. These factors may affect global demand and supply, which in turn could slow down the process of reducing inflation in the euro area.

Technical condition of the euro

Within the 5-year performance, a relatively regular sideways trend can be observed from 2023 onwards, which can be described as a price correction, but the end of 2024 and the beginning of 2025 brought a significant decline below the aforementioned correction, which probably resulted in the withdrawal of a significant amount of liquidity. In such cases, it is necessary to wait to see how the price will behave further.*

In this case, we can observe a very impulsive bullish price delivery, which, combined with the selection of liquidity, opens up space for continued growth. The criterion for maintaining bullish sentiment is that the price does not close below $1.05 on the weekly timeframe. This would reflect that the bearish price delivery is back in effect.*

Performance of the euro price in US dollars over the past five years*

Conclusion

The ECB will continue to monitor the economic situation and inflation, with the key factor for investors being how the bank will approach further interest rate cuts. Even if inflation is approaching the target level, the central bank leaves room for flexibility to respond to global risks. It is therefore important for investors to keep an eye on the ECB's following statements, as they will have a significant impact on the development of financial markets in Europe.