Both the market and economists agree that the European Central Bank will cut interest rates, and ECB officials seem to be openly discussing how much they should cut. In either case, the market is predicting that the upcoming meeting will lean towards dovish sentiment, ironically creating conditions for a rebound.

In late summer and autumn, the EUR/USD has shown a downward trend for two consecutive months. But the latest GDP data released later showed that European economic growth accelerated while the United States slowed down. Since then, the currency pair has successfully rebounded a bit, and there has been much less discussion about parity. But the rebound indicates that economic growth, not inflation, is driving up the price of the euro. This is of great significance for how the market will respond to the central bank's measures.

Almost all economists surveyed unanimously predict that the European Central Bank will cut interest rates by 25 basis points at the end of its meeting on Thursday. A few opponents support a 50 basis point interest rate cut. The market is slightly warmer, with a 90% chance of a 25 basis point rate cut and a 10% chance of a 50 basis point rate cut.

This means that no matter what decision the European Central Bank makes, the euro has room for fluctuation. Even in the most likely scenario, where Lagarde and his colleagues support a target of 25 basis points, the market may reassess that 10% possibility, providing a slight boost to the euro. On the other hand, if the European Central Bank really cuts interest rates by 50 basis points as many "southern" countries are demanding, the market will have a greater decline to reassess the 90% unrealized forecast.

Despite the recent increase in inflation, the market generally expects the European Central Bank to be quite moderate. This is because it is expected that CPI will rebound around the end of this year and then fall back to the target level in early 2025. The idea is that in the face of an almost stagnant economy, the European Central Bank does not want to wait so long to relax its monetary policy. This means that while a 25 basis point interest rate cut is expected, there will also be a statement and a press conference opening the door for further easing of monetary policy at the next meeting. If this situation does not occur, the market may react as if the European Central Bank has become even harder.

People strongly feel that monetary policy will be relaxed in the future. Economists expect a 100 basis point interest rate cut next year, while the market is more moderate, with an expected 150 basis point cut by the end of next year. This makes it more likely for the European Central Bank to experience an unexpected upward trend rather than a downward trend, posing an upward risk to the euro. But due to the strong tendency towards easing, this upward trend may soon fade away.

Analysts seem to believe that after Trump takes office again next year, the European Central Bank may overlook the political turmoil and potential tariffs in Europe. However, this may be raised at a press conference. Political uncertainty cannot be completely ignored, as the risk premium has pushed up bond prices and affected the euro.

As the market seems to believe that the ECB is currently prioritizing economic growth over the final stage of high inflation, the focus of market attention may shift towards the European Central Bank's economic forecasts. The European Central Bank has spent decades fighting against low growth and low inflation, and it is understandable that it hopes to avoid repeating the same mistakes. The market may pay attention to whether the European Central Bank expects the economy to rebound early next year in order to anticipate the possibility of future easing policies.