On Monday, analysts from ING forecasted that the EUR/USD currency pair is likely to remain in a holding pattern until the release of key US economic data later this week. The anticipated data includes activity surveys in the eurozone and the IFO business climate index from Germany, with the market's attention particularly focused on Thursday and Friday's releases.
According to ING, the easing of Middle East tensions is beneficial for the euro, which tends to perform better in risk-on environments. However, this also diminishes the likelihood that rising oil prices might postpone the European Central Bank's (ECB) rate-cutting cycle. Current market expectations are solidifying around a total easing of 75 basis points for 2024, aligning with ING's projections.
The eurozone's Purchasing Managers' Index (PMI) is set to be released on Wednesday and is expected to show a slight improvement, though the manufacturing sector continues to weigh on the overall figure. On Thursday, the focus will shift to Germany's IFO business climate index, with a modest increase anticipated by consensus estimates.
On Friday, the ECB will publish March's CPI inflation expectation surveys. The three-year inflation forecast is projected to decline slightly, supporting the ECB's recent dovish stance. Meanwhile, ECB President Christine Lagarde is scheduled to give a lecture at Yale University today, where she is not expected to address current monetary policy issues.
Throughout the week, various ECB officials will deliver speeches, with market participants keen to gauge whether recent geopolitical events might influence the central bank's policy direction, particularly among members known for their hawkish views.
ING suggests that while there may be potential for a minor rebound in the EUR/USD, prevailing monetary policy differences between the Eurozone and the US point to downside risks. The firm indicates that a strong showing in US data later this week could prompt the currency pair to re-test the 1.0600 level.
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