The European Central Bank may continue its accommodative monetary policy.

The euro appreciated slightly after President Donald Trump delayed implementing import tariff increases early in his term. This policy could hinder global economic growth and potentially drive U.S. inflation higher. Moreover, the initial business-friendly policies helped bolster investor confidence.

The European Central Bank (ECB) continues to emphasize a cautious approach to lowering interest rates but has also signaled potential additional monetary easing, citing slowing inflation rates. Although the timing of rate cuts remains uncertain, policymakers have noted a future trend of declining inflation, suggesting that gradual interest rate reductions are appropriate. They further pointed out the stagnant economic growth in several member countries, indicating that rate cuts would address not only inflation but also weak economic conditions.

Many policymakers support lowering interest rates to levels that are not excessively high, enabling further economic growth. Investors predict that the ECB might reduce interest rates by another 25 basis points, bringing them to approximately 3.00% at the January 30 meeting, with further reductions likely throughout 2025. This could result in rates near 2% by the end of the year, aiming to support economic growth without excessive slowing.

Eurozone inflation rose to 2.4% in December, marking three consecutive months of increases. This aligns with market expectations and the ECB’s initial estimates. The rise was largely influenced by base effects from the previous year when energy prices fell sharply. Energy costs increased slightly this year, while inflation in the services sector grew modestly to 4% from 3.9%. Food inflation also rose slightly due to rapid growth in processed food prices. Meanwhile, core inflation, excluding volatile food and energy prices, remained steady at 2.7%. The ECB projects core inflation will return to its 2% target by the end of this year.

The Eurozone’s economic sentiment index rose by 1 point to 18 in January 2025, exceeding analysts’ expectations of a slight drop to 16.9. However, the region still faces economic concerns and uncertainties, including slowing GDP growth in Germany, rising inflation, and political uncertainties. Additionally, uncertainty over the new U.S. president’s economic policies has led to forecasts that there is nearly a 60% chance of no significant change in economic activity this year, an 11% chance of worsening conditions, and a 29% chance of improvement.

The Eurozone recorded a trade surplus of €16.4 billion in November, down from €18.2 billion in the same month last year but better than market expectations of €8.5 billion. Exports fell by 1.6% year-over-year to €248.3 billion, while imports declined by 1% to €231.9 billion. The decrease in exports was driven by a 16.5% drop in energy products and a 6.7% reduction in vehicle and machinery exports. On the import side, purchases of food and beverages rose by 18.7%, offsetting a 13% decrease in energy imports.

Techical analysis data (5H)

Resistance: 0.9601, 0.9629, 0.9643

Source: Investing.com

Buy/Long 1: If the price touches support in the price range of 0.9545 - 0.9559 but cannot break the support at 0.9559, you may set a TP at approximately 0.9629 and SL at around 0.9517 or according to your acceptable risk.

Buy/Long 2: If the price breaks the resistance in the price range of 0.9601 - 0.9629, you may set a TP at approximately 0.9643 and SL at around 0.9545 or according to your acceptable risk.

Sell/Short 1: If the price touches resistance in the price range of 0.9601 - 0.9629 but cannot break the resistance at 0.9601, you may set a TP at approximately 0.9545 and SL at around 0.9643 or according to your acceptable risk.

Sell/Short 2: If the price breaks the support in the price range of 0.9545 - 0.9559, you may set a TP at approximately 0.9517 and SL at around 0.9629 or according to your acceptable risk.

Pivot point January 22, 2025 10:05 PM. GMT+7