EUR/USD remains vulnerable below 1.0750 after ECB left interest rates unchanged

• EUR/USD marks a new monthly low at 1.0720 after the ECB kept interest rates stable.
• The ECB's Christine Lagarde gave no clues about when the central bank might move to cut rates.
• The US dollar strengthens as investors do not see the Fed cutting rates anytime soon.

The EUR/USD pair continues to fall to 1.0720 in the early hours of the US session on Thursday, after the European Central Bank (ECB) decided to maintain the interest rate of its main refinancing operations at 4.5% . The ECB was expected to keep its interest rates higher to maintain downward pressure on consumer price inflation.

In its monetary policy statement, the ECB commented that tight financial conditions and unrealized interest rate hikes are weighing on global demand and putting downward pressure on inflation. The ECB denied committing to any particular rate path and said it would continue to rely on data to determine how long interest rates should remain restrictive.

At the press conference, ECB President Christine Lagarde warned that the economy is weak and risks to growth have tilted to the downside. Lagarde added that labor market conditions are continually easing and demand from the manufacturing sector is weak. She is confident that inflation will fall to the target next year, which is 2%. Christine Lagarde did not comment on when the ECB might start cutting interest rates.

The strength of the US Dollar also drives the weakness of the major currency pairs. The US Dollar Index (DXY), which measures the value of the Dollar against six major currencies, is approaching highs in more than four months, around 105.20 points. The appeal of the US dollar strengthens as traders move away from market expectations of rate cuts from the Federal Reserve (Fed). The Fed is expected to keep interest rates between 5.25% and 5.50% at least until the September meeting, as consumer price inflation in the United States in March was higher than expected.

For its part, the US Bureau of Labor Statistics (BLS) has published data on the underlying Producer Price Index (PPI) for March. The US core PPI rose strongly at 2.4%, compared to estimates of 2.3% and the previous reading of 2.0%.