The Swiss National Bank voted to cut interest rates by 25 basis points at the December meeting to 0.75%, the lowest since September 2022, matching expectations. 

Euro rose in European trade on Thursday against a basket of major rivals, heading for the first profit in five days and settling near a one-week trough. 

The gains are still limited as investors are shunning new positions before the European Central Bank’s policy decisions today. 

The ECB will likely cut interest rates today and provide clues about the path forward in 2025. 

The Price 

The EUR/USD rose 0.15% to $1.0509, with a session-low at $1.0491.

The pair closed down 0.3% on Wednesday, the fourth loss in a row, plumbing a week trough at $1.0480 after US inflation data.

ECB

The European Central Bank is wrapping up its last policy meeting of 2024 amid expectations it’ll cut interest rates once more, and will likely provide clues on the future path of interest rates in 2025.

The ECB said after the October meeting that it’ll follow a path dependent on data and economic conditions at each policy meeting to determine the appropriate level of monetary restriction.

ECB President Christine Lagarde told Parliament in Brussels last week the bank’s fight with inflation is approaching its end but hasn’t been won yet. 

Analysts now expect European interest rates to fall by 25 basis points today to 3.15%, the lowest since February 2023. 

Interest Rate Gap

The gap between Europe and US interest rates has ballooned to 135 basis points, and will likely expand to 160 basis points this week, in turn pressuring the euro.

The Australian dollar rose in Asian trade on Thursday against a basket of major rivals, on track for the first profit in three days against the US dollar and moving away from recent 13-year lows following strong Australian labor data.

The data showed tight conditions in the Australian labor market, which increases pressures on the Reserve Bank of Australia and paves the way for an extended duration of tight monetary policies. 

Thus, the odds of an Australian interest rate cut in February 2025 fell, with some even doubting an April cut, which was fully priced in after this week’s RBA meeting. 

The Price

The AUD/USD rose 0.8% to 0.6419, with a session-low at 0.6367.

The pair lost 0.15% today, the second loss in a row, hitting 13-month lows at 63.37 cents following the RBA meeting.

RBA

The Reserve Bank of Australia decided to hold interest rates at 4.35% as expected by the markets.

The RBA said in its policy statement that recent data on inflation and economic conditions matched expectations, and expressed confidence that inflation is moving sustainably towards targets. 

RBA President Michelle Bullock said policymakers are monitoring the payrolls data closely in addition to inflation and retail sales data before the February meeting. 

Following the meeting, the odds of a 0.25% RBA interest rate cut in February rallied from 35% to 70%, and the odds of such a cut in April 2025 rose to 100%.

Australian Labor Market 

Official data showed Australia added 35.6 thousand new jobs in November, above estimates of 25 thousand, and up from 12.1 thousand in October. 

Australia’s unemployment stood at 3.9% in November, the lowest since March, and beating estimates of 4.2%, and down from 4.1% in the previous reading. 

Australian Rates

Following the data, the odds of an RBA interest rate cut in February 2025 fell to 55%, and the odds of such a cut in April fell to 90%. 

Official data showed Australia added 35.6 thousand new jobs in November, above estimates of 25 thousand, and up from 12.1 thousand in October.