On Monday, as economic indicators for the Eurozone tilted towards a hawkish stance for the European Central Bank (ECB), strong PMI figures indicated continued growth momentum.
Furthermore, surprising acceleration from 4.5% to 4.7% on an annual basis was observed in negotiated wages for the first quarter, contradicting expectations of a potential interest rate cut in June.
However, despite ECB’s swift response to wage increase data, downplaying the recovery with a blog post, attributing the rise to one-off payments, and predicting a slowdown in wage pressures for 2024.
Despite ECB’s efforts to allay wage increase concerns, the probability of postponing an interest rate cut beyond June is very low, even if Consumer Price Index (CPI) data, to be released next week, comes in higher than expected. Recent economic data has also increased the likelihood of ECB adopting a more hawkish tone post-June meeting.
Attention on Monday focuses on the Eurozone calendar for statements from ECB’s hawkish members like Isabel Schnabel, Madis Muller, and Joachim Nagel. These members’ comments, following recent economic figures, could further steer the post-June policy narrative towards hawkishness.
The EUR/USD currency pair is currently testing the 1.0800 support level and is largely influenced by dynamics of the US dollar. US Core Personal Consumption Expenditures (PCE) data, to be released within a week, is expected to have a more significant impact than Eurozone CPI data.
However, the possibility of higher inflation in the Eurozone, coupled with recent optimistic interpretations of US inflation data, could renew bullish sentiment for EUR/USD. As a result, a short-term rise towards the 1.0900 level is seen as more likely than a decline towards the 1.0700 level.
Source: investing.com
