European inflation remains a concern.

The eurozone's inflation rate accelerated in April, but underlying inflation rates decreased, which may lead the European Central Bank (ECB) to increase interest rates at its policy meeting on Thursday, despite the slowing inflation rate compared to the end of last year. Nevertheless, the inflation rate remains high.

The general inflation rate in the eurozone increased to 7.0% in April from 6.9% in March, in line with analysts' expectations. However, underlying inflation rates excluding fresh food and energy increased by 7.3% in April, down from 7.5%, while the inflation rate excluding alcohol and tobacco slowed to 5.6% from 5.7%, lower than the expected 5.7% and the first decrease since June last year.

Inflation rates for services accelerated to 5.2% from 5.1%, but the inflation rate for non-energy industrial goods slowed to 6.2% from 6.6%.

According to analysts at Morgan Stanley, "the ECB's policy stance depends on the underlying inflation rate, which is difficult to decrease. This will lead to an increase in interest rates."

Investors predict that the ECB's deposit interest rate will increase to 3.75% by the end of this summer, despite fluctuating predictions over the past few months.

The International Monetary Fund (IMF) is calling on the European Central Bank (ECB) to raise interest rates until mid-next year and is urging the EU finance ministers to tighten fiscal policies in order to jointly manage high inflation rates. 

Alphred Kammer, head of the IMF's European department, said that inflation is the biggest concern and "our main policy advice is to deal with inflation and that means we need to use monetary policy tools. For the ECB, that means tightening policy for longer. We expect that to happen around mid-next year to bring inflation down to target by 2025. Inflation is a tax, particularly on the poor, and that needs to be dealt with."

He added that the EU finance ministers must support the ECB by scaling back the fiscal stimulus measures introduced during the COVID-19 pandemic and used during the recent crisis triggered by Russia's invasion of Ukraine.

"Inflation cannot be managed by central banks alone, but you need fiscal policies to support it," he said, noting that the country's budget deficit reduction has not actually occurred because the government has extended energy price subsidies to help citizens.

Technical analysis data (5H)

Resistance: 0.9091, 0.9098, 0.9104

Support: 0.9077, 0.9072, 0.9064

Source: Investing.com

 

Pivot Points May 3, 2023 08:53 AM GMT+7