- EUR/USD is stuck in a tight range around 1.0770 amid the absence of tier-1 Eurozone economic data this week. Investors are expected to predict the next move in the Euro based on speculation about the European Central Bank’s (ECB) interest rate outlook.
- Financial markets anticipate that the ECB will extend its rate-cut campaign, which is expected to start at the June meeting. ECB policymakers have projected three rate cuts this year, which are aligned with market expectations.
- ECB policymaker and Bank of Greece Governor Yannis Stournaras said in an interview with a Greek media outlet that he sees three rate cuts this year. He sees a rate cut in July too as possible and added that the Eurozone’s economic rebound in the first quarter of the year made three cuts more likely than four.
- ECB’s confidence in beginning to reduce interest rates from June has been deepened due to consistently easing price pressures. Eurozone’s core Consumer Price Index (CPI), which is the ECB’s preferred inflation measure, has been declining consistently since July 2023. The annual core CPI has come down to 2.7% in April, suggesting that inflation is on course to return to the desired rate of 2%.
- Also, a sharp decline in Eurozone service inflation has also boosted the confidence of the ECB for cutting interest rates from the June meeting. The annual Eurozone service inflation softened to 3.7% in April after remaining steady at 4% for five months. About that, ECB policymaker Philip Lane said that April inflation data finally showed progress on services prices. However, he warned that the ECB would continue to focus on services to make sure it did not derail disinflation later on.
- Meanwhile, Eurostat reported strong Retail Sales data for March. Monthly Retail Sales rose strongly by 0.8% from the estimates of 0.6% after contracting by 0.3% in February. Annually, Retail Sales increased by 0.7% after declining 0.5% (revised from -0.7%) in February.
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