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EURUSD gives back the rebound from earlier this month as attention turns to the European Central Bank (ECB) meeting, and the Euro may come under increased pressure over the next 24-hours of trade as the Governing Council is widely expected to deliver a rate cut.
EURUSD appears to be on track to test the monthly-low (1.0926) as the ECB launches another round of Targeted Long-Term Refinance Operations (TLTRO), with the central bank also expected to reduce the Deposit Facility Rate by 10bp to -0.50%.
The ECB may deem the new measures sufficient to insulate the Euro area as "members generally concurred that incoming information had remained broadly consistent with the June staff projections," but the updated forecasts coming out of the ECB may fuel speculation for additional monetary support as the central bank struggles to achieve its one and only mandate for price stability.
In turn, the Governing Council may continue to endorse a dovish forward guidance for monetary policy as the central bank "stands ready to adjust all of its instruments, as appropriate, to ensure that inflation moves towards its aim in a sustained manner," and it remains to be seen if the central bank will take additional steps ahead of President Mario Draghi's departure at the end of October as "the balance of risks remained tilted to the downside."
With that said, the ECB may come under pressure to reestablish its asset purchase program, but recent remarks from Governing Council officials suggest the central bank is in no rush to further expand the balance sheet as "market-based measures of inflation expectations had been broadly unchanged amid some notable intra-period volatility."
Nevertheless, a slew of new measures may drag on the Euro, with EURUSD at risk of facing a more bearish fate over the remainder of the year as the ECB continues to push monetary policy into uncharted territory.