European Central Bank Likely to Cut Interest Rates Further This Year.

The euro continues to strengthen despite U.S. President Donald Trump imposing more than a 20% tariff on European imports. Additionally, the euro has been supported by a weakening U.S. dollar, as these tariffs have become a significant factor in global trade conflicts, raising concerns about economic growth. Meanwhile, the latest economic data indicates that both inflation and core inflation in the Eurozone have been consistently declining. With inflationary pressures easing and global trade tensions intensifying, markets anticipate that the European Central Bank (ECB) could reduce interest rates by another 65 basis points this year.

Household lending in the Eurozone increased by 1.5% year-on-year to €6.956 trillion in February, marking the highest growth since 2023 and surpassing the forecasted 1.4%. Similarly, corporate lending rose by 2.2%, up from 2% in January, reflecting increased borrowing capacity in both the industrial and household sectors.

Annual inflation in the Eurozone fell to 2.2% in March, slightly below the market expectation of 2.3%. This decline was mainly driven by a slowdown in service sector inflation, which hit a 33-month low at 3.4%, down from 3.7% in February. Meanwhile, energy costs are expected to continue decreasing. However, inflation remains stable for non-energy industrial goods. On the other hand, processed and unprocessed food prices surged by over 4.1%. Core inflation, which excludes volatile food and energy prices, fell to 2.4%, slightly below the 2.5% market forecast.

The Eurozone’s average inflation expectations for the next 12 months remained steady at 2.6% in February, unchanged from January. Meanwhile, inflation expectations for the next three years declined slightly to 2.4%. These figures suggest that consumers anticipate inflation to slow, while uncertainty about inflation expectations for the next 12 months has decreased to its lowest level since 2022. However, economic growth projections for the next 12 months remain pessimistic, with the unemployment rate expected to rise to 10.5% from 10.4%.

The Eurozone’s manufacturing PMI stood at 48.6 in March, indicating continued contraction in the manufacturing sector. However, production activity is expected to improve in the second half of the year, particularly as output increased for the first time in two years, marking the fastest growth rate since 2022, despite a decline in new business volumes. Meanwhile, layoffs have decreased from a four-year high, recording the lowest job cut rate in seven months. Additionally, input costs have reached their highest level in seven months.

The unemployment rate in the Eurozone slightly decreased to a new low of 6.1% in February, down from 6.2% in January, defying analysts’ expectations of stability at 6.2%. The number of unemployed individuals dropped by 70,000 from the previous month to 10.58 million. However, the youth unemployment rate for job seekers under 25 slightly increased to 14.2% from 14.1% in the previous month. Among the largest economies in the European Union, Germany had the lowest unemployment rate at 3.5%, followed by the Netherlands at 3.8%.

Techical analysis data (5H)

Resistance: 0.9138, 0.9223, 0.9302

Source: Investing.com

Buy/Long 1: If the price touches support in the price range of 0.8895 - 0.8974 but cannot break the support at 0.8974, you may set a TP at approximately 0.9223 and SL at around 0.881 or according to your acceptable risk.

Buy/Long 2: If the price breaks the resistance in the price range of 0.9138 - 0.9223, you may set a TP at approximately 0.9302 and SL at around 0.8895 or according to your acceptable risk.

Sell/Short 1: If the price touches resistance in the price range of 0.9138 - 0.9223 but cannot break the resistance at 0.9138, you may set a TP at approximately 0.8895 and SL at around 0.9302 or according to your acceptable risk.

Sell/Short 2: If the price breaks the support in the price range of 0.8895 - 0.8974, you may set a TP at approximately 0.881 and SL at around 0.9223 or according to your acceptable risk.

Pivot point April 3, 2025 11:05 PM. GMT+7