The primary currency pair surged even higher on Friday. The current EURUSD exchange rate stands at 1.0990.
The market is full of optimism and interest in risk, benefitting the EUR and reducing the attractiveness of the USD as a safe-haven asset.
The December meeting of the European Central Bank ended neutrally, precisely as expected. The interest rates remained unchanged, with the key rate at 4.50% per annum and the deposit rate at 4.00%. In its comments, the ECB emphasised its commitment to maintaining the rates at a restrictive level.
The ECB must ensure that inflation returns to its 2.0% target in the medium term. Sustaining a high interest rate for a sufficient duration is instrumental in achieving this goal.
At the same time, price pressures in the region are subsiding. The ECB has revised its expectations for 2023 and 2024 downward, with core inflation projected at 5.0% in 2023 and 2.7% in 2024. GDP growth is anticipated to be 0.6% and 0.8%, respectively.
The ECB continues to reduce its balance sheet, refraining from reinvesting funds generated from maturing securities. Reinvestments will be fully completed by the end of 2024.
Essentially, the European Central Bank communicated that, while there are currently no reasons for lowering the interest rate, it remains a possibility for the future. This was a positive signal for the EUR exchange rate.