The European Central Bank is likely to continue cutting interest rates.

The euro appreciated slightly following reports that defense spending in the Eurozone may increase slightly, which directly influenced investor sentiment. UK Prime Minister Keir Starmer stated that there are plans to bring an end to the ongoing war between Russia and Ukraine in a favorable manner while ensuring the security of allied nations. Germany is expected to play a key role in driving defense spending, with reports indicating the possible establishment of a special fund dedicated to defense and infrastructure.

Investors are awaiting the European Central Bank’s policy meeting, where a fifth consecutive interest rate cut is expected. Meanwhile, Eurozone inflation has declined slightly, leading investors to anticipate a more accommodative monetary policy from the ECB in the future.

The Eurozone's manufacturing PMI rose slightly to 47.6 in February from 46.6 in January. However, this figure still indicates a contraction in the manufacturing sector. Germany, France, and Italy saw a slower rate of contraction, while the Netherlands stabilized after seven months of contraction. However, new orders fell to their lowest level in nearly three years, while layoffs increased at the fastest rate in four years. Additionally, production costs saw a sharp rise in raw material prices, forcing companies to cut some expenses.

Inflation in the Eurozone dropped to 2.4% year-on-year in February, down from 2.5% in January. This slowdown was primarily driven by the easing of inflation in the services sector, which fell to 3.7%, while energy prices plummeted to 0.2% from 1.9% the previous month. Core inflation, which excludes volatile food and energy prices, declined to 2.6%, marking the lowest level since 2022.

The European Central Bank’s Governing Council maintains the view that current monetary policy remains too restrictive, and it is still too early to determine a precise timeline for rate cuts. According to the latest meeting report, some members remain concerned about persistent inflation in the services sector and the potential for rising energy prices. At the same time, weak economic growth and inflation approaching the ECB’s 2% target remain key factors influencing the decision to cut interest rates.

The Eurozone economic sentiment index rose to 96.3 in February, reaching a five-month high. Business confidence improved slightly to -11.4 amid expectations for industrial sector growth. Meanwhile, consumer confidence increased to -13.6, although consumers still hold a negative outlook on the overall economic situation. Their purchasing power has not significantly increased, which may lead to delayed discretionary spending.

Techical analysis data (5H)

Resistance: 0.9537, 0.956, 0.9578

Source: Investing.com

Buy/Long 1: If the price touches support in the price range of 0.9478 - 0.9496 but cannot break the support at 0.9496, you may set a TP at approximately 0.956 and SL at around 0.9454 or according to your acceptable risk.

Buy/Long 2: If the price breaks the resistance in the price range of 0.9537 - 0.956, you may set a TP at approximately 0.9578 and SL at around 0.9478 or according to your acceptable risk.

Sell/Short 1: If the price touches resistance in the price range of 0.9537 - 0.956 but cannot break the resistance at 0.9537, you may set a TP at approximately 0.9478 and SL at around 0.9578 or according to your acceptable risk.

Sell/Short 2: If the price breaks the support in the price range of 0.9478 - 0.9496, you may set a TP at approximately 0.9454 and SL at around 0.956 or according to your acceptable risk.

Pivot point March 4, 2025 10:53 PM. GMT+7