ECB President Christine Lagarde outlined some conditions that must be achieved before starting to cut Eurozone interest rates. But EUR/USD remains under pressure ahead of today's FOMC announcement.

The euro has been on a losing streak since the last ECB meeting, which revealed the idea of a rate cut starting in June. EUR/GBP slumps below the 0.8550 threshold, while EUR/USD is now at around 1.0855. Several European Central Bank (ECB) officials attempted to dampen interest rate speculation in a speech today (20/March), but the Single Currency was unmoved.

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The market has now fully priced in the prospect of three ECB rate cuts by the end of this year. Some market participants have even anticipated the prospect of a fourth cut, as voiced by some ECB officials. The market expects the ECB interest rate to fall from the current 4% level to 3.25% or 3.0% by the end of December. This expectation is based on Eurozone inflation data that slumped to 2.6% last month.

Even ECB President Christine Lagarde acknowledged that the current decline in Eurozone inflation will be more durable, as it stems from a decline in underlying inflationary pressures (excluding volatile food and energy prices). However, Lagarde does not seem to want the market to expect massive interest rate cuts like now.

Lagarde said the ECB will not commit to a specific number of interest rate cuts once it starts its monetary easing later. The ECB's chief economist, Philip Lane, also said it would "calibrate for a long time" to determine the right level of interest rates.

"Our decisions must remain data-dependent and (be) made meeting by meeting, responding to new incoming information," Lagarde said at a conference in Frankfurt, "This implies that, even after the first rate cut, we cannot commit in advance to a particular interest rate path."

Lagarde outlined many conditions that must be achieved before the ECB starts cutting interest rates. These include slowing wage growth, a continued decline in inflation, and new internal projections that ensure that price growth is heading towards the 2% target.

"If these data show a sufficient degree of alignment between the baseline inflation path and our projections, and assuming transmission remains strong, we will be able to move to the phase-out of our (loose monetary) policy cycle and make policy less restrictive," Lagarde said.

EUR/USD responded to Lagarde's speech by crawling up from the daily low of 1.0835s to the 1.0855s range. However, the direction of the euro trend is still bearish in the short term. Market participants are currently focusing more on the announcement of the Fed's FOMC meeting results in the next few hours.