EUR/USD Struggles to Establish Direction Amid ECB Decision and US Inflation Expectations

The EUR/USD pair has seen a recovery attempt after the European Central Bank's (ECB) decision to raise interest rates, but this move was not strong due to ongoing uncertainty surrounding both central banks.

The ECB decided to increase interest rates by 25 basis points, taking the deposit rate from 2.25% to 2.50%, and the main refinancing rate moved from 2.40% to 2.65%. This decision reflects a more aggressive monetary policy stance, which is expected to continue.

ECB President Christine Lagarde emphasized that economic activity across Europe has been performing better than anticipated, but highlighted recent inflationary pressures. She noted that inflation could remain above the ECB's target for an extended period and suggested that the energy shock generated by the conflict in the Middle East may not have been fully transmitted into the European economy.

The market is now awaiting tomorrow's release of the U.S. Consumer Price Index (CPI) report, which will provide insight into inflation trends and potentially influence expectations surrounding the Federal Reserve. The current caution in the market is partly due to this upcoming event, as well as ongoing expectations regarding the U.S. dollar.