EUR continues to face various negative factors 

According to a new survey by the European Central Bank (ECB) which found that consumers in the eurozone have adjusted their inflation expectations downwards in February and have a more positive outlook for economic expansion and job hiring. However, at the same time consumers still expect the economy to shrink despite the index indicating that the eurozone has escaped recession.

Over the next 12 months, the inflation rate forecast has adjusted downwards to 4.6% from 4.9%, while the inflation rate forecast over the next three years has also decreased to 2.4% from 2.5%. In terms of economic expansion forecasts over the next 12 months it has increased to -0.9% from -1.2% the previous month while the forecast for job vacancies over the next 12 months has decreased to 11.5% from 11.6%.

Government bond yields in the eurozone have adjusted upwards in today's market opening while investors are turning back to inflation and the ECB's interest rate hike. Investors continue to analyze the impact of the OPEC+ group's announcement of further oil production cuts which caused oil prices to soar yesterday.

According to derivative market data, investors expect the ECB interest rate to touch a maximum of 3.6% in September. Prior to the banking crisis investors had predicted that the interest rate would touch a maximum of over 4%.

The Producer Price Index (PPI) for the Eurozone has fallen for the fifth consecutive month and more than expected in February due to a decline in energy prices. It decreased by 0.5% month-on-month in February and increased by 13.2% year-on-year, marking a continued decline from its peak of 43.3% in August, which was a period when energy prices surged more than twice their level from the previous year. Analysts predict that the PPI index will decrease by 0.3% month-on-month and increase by 13.3% year-on-year with the core PPI which excludes energy increasing by 0.2% month-on-month and 10.2% year-on-year.

Morgan Stanley has revised its forecast for the Eurozone's economic expansion upwards by 0.20% to 0.8% this year citing better-than-expected economic data.

Morgan Stanley expects that the European Central Bank's tight monetary policy measures have yet to significantly impact the economy but the anticipated effects of such measures have caused companies to revise down their GDP forecasts for next year to 1% from 1.1%.

Economist Mr. James Eisenstadt suggests that "we may see a stronger GDP figure in the first half of this year but it will slow down afterwards. The negative impact of restrictive monetary policies will increase in the euro area and the trend for the US economy will be more negative than expected."

He expects the ECB to raise interest rates three more times this year while the ECB is fighting inflation which stood at 6.9% in March still above the ECB's target of 2% by raising interest rates to 3.50% in the current interest rate cycle.