31 Jan 2025

• EUR/USD trades in negative territory near 1.0385 in Friday’s Asian session.
• The ECB cut borrowing costs by 25 bps on Thursday, as widely expected. 
• US GDP came in weaker-than-expected in Q4.
• The EUR/USD currency pair is currently facing significant selling pressure, trading around the 1.0385 level during the Asian trading session on Friday. This downward movement is largely attributed to the market's anticipation of further interest rate cuts by the European Central Bank (ECB), which is putting considerable strain on the Euro (EUR) relative to the US Dollar (USD). Investors are also keenly awaiting additional information regarding potential new tariff threats from US President Donald Trump, which could act as further catalysts for market movements.
  
  In its January meeting held on Thursday, the ECB confirmed expectations by announcing a reduction in the deposit facility rate, lowering it to 2.75%. This decision reflects the central bank's response to a challenging economic landscape characterized by uncertainty and persistent inflationary pressures. The ECB has signaled that it may implement additional rate cuts in the future, which could further undermine the strength of the Euro and contribute to its depreciation against the Dollar.
  
  Adding to the bearish outlook for the Euro, preliminary data released by Eurostat on Thursday revealed that the euro zone economy stagnated in the fourth quarter (Q4) of 2024, following a more robust growth rate of 0.4% in the previous quarter (Q3). This stagnation was particularly disappointing as it fell short of the market's expectations for a modest 0.1% increase. Such underwhelming GDP figures have intensified the negative sentiment surrounding the Euro, leading to increased selling pressure.
  
  Market participants are now turning their attention to upcoming economic indicators from Germany, specifically the Retail Sales and Unemployment Rate data for December, which are scheduled for release later on Friday. A stronger-than-expected performance in these reports could provide some relief for the Euro and potentially mitigate the losses experienced by the EUR/USD pair. Conversely, weak data could exacerbate the current downward trend, reinforcing the bearish sentiment in the market. As traders navigate these developments, the interplay between economic indicators and central bank policies will remain crucial in shaping the future trajectory of the Euro against the US Dollar.