The EUR/USD duo briefly touched a high level of 1.1033 in Thursday's trading (2/February). However, it can be seen that this pair then dropped to the range of 1.0900.

It was occurred after the announcement of the results of the European Central Bank (ECB) meeting. The reason is that the ECB added a dovish gesture in its interest rate hike announcement.

The ECB tonight raised interest rates in line with market expectations, by 50 basis points. They also affirmed the intention to continue to Increase that rates significantly.

Besides that, they also want to keep everything at a fairly restrictive level. Their goal is to achieve the medium-term inflation target at the 2% level. 

50 BPS Raise may be Done in March 

However, the ECB's subsequent statement sparked market questions about the direction of European interest rates after the first quarter. The Board of Governors wishes to raise interest rates by another 50 bps in March.

Then they may evaluate the next path of monetary policy, as can be seen from the ECB statement. Market participants can assume that the ECB is likely to only raise interest rates one more time this year.

After that, the cycle is maybe halted. That assumption is relatively more dovish than the results of previous ECB meetings, while also aligning with market pessimism. It is especially about the outlook for the Eurozone economy. As a result, the future of the euro is again in jeopardy.

Euro is Weaken 

The analysts marked a reversal in United States inflation in mid-2022, and it proved correct. The slowdown in US inflation allowed the Fed to make a dovish pivot, pushing the USD lower. 

Now it's the ECB's turn. The same slowdown in inflation is taking place in the Eurozone. The euro is going to fall as said by Robin Brooks, a Chief Economist at IIF and former Chief FX Strategist of Goldman Sachs. 

As this news was written midway through the New York session, the Euro was observed to weaken against the U.S. dollar and Japanese yen. Those were by about 0.5 percent and 1.0 percent.

The EUR/GBP fell but maintained its position in the range of multi-month highs. That was as the nuances of the results of the US central bank meeting tonight were much more dovish than the EC. 

BOE Showed a Dovish Stance 

The Bank of England (BoE) showed the most dovish stance compared to the other two major central banks that both held regular meetings this week. It brought some effects in the market. 

As a result, the pound sterling became one of the worst-performing major currencies in tonight's New York session (2/February). GBP/USD subsided about 1 percent.

That was happened until it touched a two-week low of 1.2239. EUR/GBP even briefly broke above the 0.8950 thresholds and set a high record since September 2022.

Yesterday night’s BoE meeting raised interest rates again by 50 basis points to 4.0 percent, in line with market expectations. Voting results showed seven of the nine members supported the hike. 

BOE Changes Their Respond 

Meanwhile, the other two hoped for a fixed rate. The BoE believes inflationary pressures are stronger than expected, so there is a risk of further rate hikes. 

However, they failed to show a firm commitment to continue the cycle of rate hikes. The BoE replaced the phrase will respond decisively to (rising inflation) measures from last month's statement.

They change it to if there is evidence of more persistent (inflation) pressure, then further tightening in monetary policy will be needed. The BoE's economic projections further clarify the central bank's hesitation to raise rates.

Uk GDP forecasts will fall "slightly" throughout 2023 and the first quarter of 2024, as inflation rates and interest rates will weigh on society. The inflation will also fall to 3.0% in the year.