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The EUR/AUD currency pair extended a pullback from recent 3 1/2-week peak of 1.6630 on Thursday, after Australian consumer inflation expectations data and as focus sets on the outcome of the European Central Bank’s policy meeting later today.

The European Central Bank is largely expected to lower its main refinancing operations rate by 25 basis points to 4% at its September policy meeting, while its deposit facility rate is expected to be reduced to 3.50% from 3.75% currently.

In July, the ECB left key rates intact, as most inflation indicators have stabilized or decreased.

The ECB noted that the inflationary impact of high wage growth had been mitigated by profits.

Still, domestic price pressures and services inflation have remained elevated, while headline inflation is expected to stay above the ECB’s target into 2025.

Market players will be closely watching ECB President Christine Lagarde’s press conference for any hints regarding future interest rate trajectory.

In Australia, data by the Melbourne Institute showed CPI inflation expectations stood at 4.4% in September, down from a four-month high of 4.5% in August.

RBA Governor Michele Bullock had noted that inflation slowed considerably since its peak, but it still remained above the midpoint of the central bank’s 2%–3% target.

Bullock had also said it was premature to consider interest rate cuts.

Annual headline inflation in Australia accelerated to 3.8% in the second quarter from a nine-quarter low of 3.6% in Q1.

As of 7:37 GMT on Thursday the EUR/AUD currency pair was edging down 0.18% to trade at 1.6468.

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