The start of the new week was marked by a significant amount of various news from the European Union. To recap, on Monday, Luis de Guindos, Peter Kazimir, and Mario Centeno spoke. On Tuesday, data on GDP in the fourth quarter of Germany and the European Union was released, and European Central Bank official Boris Vujcic also spoke. So the markets received ample food for thought at the start of the week.
Unfortunately, neither the reports nor the speeches of ECB Governing Council members made it possible for us to form clear conclusions. Centeno stated that it is better to start lowering the rate sooner rather than later. Kazimir noted that it is not worth starting to soften monetary policy before June. Guindos said that the "ECB will cut interest rates when we are sure that inflation meets our 2% goal." And on Tuesday, Vujcic told reporters that "April or June doesn't really make much of a difference for the economy,".
As we can see, four representatives of the ECB have spoken, and they have a different opinion from the others. Based on this, the market couldn't have made any new conclusions other than the rate will decrease in the second quarter. This is a more dovish potential ECB decision than the market expected at the beginning of the year, so demand for the euro is falling.
Vujcic also said that it is more important to achieve a smooth transition to policy easing than to try to determine the best month for the first rate cut. According to him, 25 basis point moves are preferable to larger steps. Vujcic also mentioned that it doesn't have to be continuous, there will be some pauses.
Based on all of the above, I can conclude that the policy easing will begin in the coming meetings, but the ECB does not intend to rush the rate-cutting process. If inflation slows down slowly or stops falling, the ECB will take breaks. Take note that the market did not react in any way to Vujcic's remarks, but in general, I think that the bearish mood will increase. The FOMC meeting will be held on Wednesday. If Federal Reserve Chair Jerome Powell and the US central bank itself do not make any overtly dovish statements, the instrument should continue to fall.
Based on the analysis, I conclude that a bearish wave pattern is being formed. Wave 2 or b appears to be complete, so in the near future, I expect an impulsive descending wave 3 or c to form with a significant decline in the instrument. The failed attempt to break through the 1.1125 level, which corresponds to the 23.6% Fibonacci, suggests that the market is prepared to sell a month ago. I will only consider short positions with targets near the level of 1.0462, which corresponds to 127.2% Fibonacci.
The wave pattern for the GBP/USD pair suggests a decline. At this time, I am considering selling the instrument with targets below the 1.2039 mark because wave 2 or b will eventually end, and could do so at any moment. However, since we are currently observing horizontal movement, I wouldn't rush to short positions at this time. I would wait for a successful attempt to break through the 1.2627 level in order to grow more confident about the instrument's decline.