Euro Under Pressure As ECB Set To Be First To Cut Rates
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The European Central Bank (ECB) is expected to be the first central bank to cut interest rates, putting pressure on the euro. The ECB has strongly hinted at a rate cut in June, and the markets have already priced it in. The Federal Reserve (Fed) and the Bank of England (BoE) are likely to delay their rate cuts, leaving the ECB isolated. The euro's weakness is also influenced by higher oil prices and tensions in the Middle East. The ECB's potential rate cut may be seen as a policy error, eroding trust and pushing euro prices lower. The euro's vulnerability to fluctuations in oil prices is due to the EU's heavy dependence on imports, while the US is energy independent. Despite the expected rate cut, the euro's drop may not be as sustained as it was in 2022, as economic fundamentals are stronger for the euro now compared to then. The Fed is still likely to ease rates this year if there is economic weakness. Overall, the ECB's rate cut decision and other negative catalysts are weighing on the euro's exchange rate.
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