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Rehn Backs Rate Cut ExpectationsEURUSD is looking weaker today on the back of comments from ECB’s Rehn this morning. The ECB policymaker said that market expectations for two further rate cuts this year looked reasonable. The comments were taken as a show of support for the current outlook on rates with pricing pegging a further .45% worth of cuts before year end. Expectations had been scaled back a little on the back of the June ECB meeting. While the bank cut rates, Lagarde sounded less committed to the idea of pursuing a steady pace of easing, saying that further cuts would be data dependent.
Timing Expectations for CutsIn terms of timing, traders are looking at the potential for a further cut in September with an additional cut in December now fully priced in. However, in line with Lagarde’s guidance, incoming inflation data will be highly impactful on these expectations. If we see inflation start to cool at a quicker pace this should bolster near-term ECB easing expectations, weighing on EUR. However, if inflation remains sticky at current levels or begins to rise again, this could see easing projections pushed out towards year-end and early next year.Commenting this week, Rehn seemed unphased by the recent uptick in inflation, suggesting a willingness to overlook this as temporary. However, if inflation continues to top forecasts, this could soon lead to a revaluation, creating bullish pressure for EUR.
Technical ViewsEURUSD 
EURUSD is currently trading around the midway point of the bear channel, having broken below the 1.0724 level. While below here and with momentum studies bearish, focus is on a continuation lower and a test of the bear channel lows and the 1.0515 level support next. More By This Author:Gold Market Commentary – Wednesday, June 26Crude Oil Commentary – Tuesday, June 25Japanese Yen Commentary Tuesday, June 25
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