While the ECB is just preparing for its policy meeting to be held today, Federal Reserve Chairman Jerome Powell did not reveal any new information regarding the timing of interest rate cuts in his speech to Congress on Wednesday, the first day of his two-day appearance. However, he assured that there are plans for "broad and significant changes."
The main outcome of Powell's speech was that he acknowledged that the regulator would inevitably begin to ease credit conditions this year, dependent on incoming economic statistics. As previously mentioned, all signals a deteriorating overall picture, which could justify an initial rate cut in May or June.
The recently released numbers of new jobs from ADP and job openings from JOLTS showed lower figures than before, supporting the argument for the Fed's first rate cut at the end of spring or early summer.
And what about the ECB? Will it cut rates following the Fed?
It is no secret that all central banks belonging to the West of the global economy follow the Federal Reserve. Today, the European regulator is expected to keep its key interest rate unchanged at 5%. As for ECB President Christine Lagarde's speech, like Powell, she is unlikely to reveal anything new to the markets. Most likely, she will stay true to the Western paradigm, where the US leads in all aspects, and the Fed - in economic matters.
If the American regulator cuts rates, the ECB will immediately do the same to balance the interest rate ratio, ensuring that demand for goods from the US, or under the "Made in America" label, does not fall. As you know, the United States actively uses the resources of its "partners," effectively dominions, to emerge from the global crisis. In this scenario, according to the logic of American political and financial authorities, the economic advantage should be with the "metropolis." If it stands firm, its "partners" will also stay afloat.
Today, traders should pay attention to data on US initial jobless claims, which are expected to increase to 217,000 from 215,000. Notably, any number of claims above 200,000, with an increase in new jobs below this level, indicates a worsening overall picture in the labor market and is perceived by investors as a basis to consider interest rate cuts in May-June more likely than in the second half of this year.
Daily outlook:
EUR/USD
The pair is trading below the 1.0900 level. The ECB's decision to keep rates unchanged and vague statements about possible rate cuts in June could drive the euro up to the 1.0970 mark.
USD/CAD
The pair is trading downwards, weighed down by the Bank of Canada's decision to leave monetary policy unchanged. If the price falls below the 1.3500 mark, the pair will most likely extend losses, heading towards the level of 1.3440.