The euro held its ground above the $1.13 mark as market participants digested both positive Eurozone inflation figures and robust U.S. employment data. Expectations regarding European Central Bank (ECB) policy were largely maintained, while the U.S. Federal Reserve (FED) faces increased complexity in its rate cut considerations. Trade sentiment showed signs of improvement which further contributed to the overall market picture.
- Euro Area inflation remained at 2.2% in April, exceeding expectations of 2.1%.
- Services inflation in the Euro Area rose to 3.9%.
- Core inflation in the Euro Area, excluding food and energy, increased to 2.7%, also above expectations.
- Investors continue to anticipate 60 bps in European Central Bank rate cuts by the end of the year.
The persistence of higher-than-anticipated inflation within the Eurozone, particularly in the services sector, reinforces the view that the ECB will proceed with monetary easing, albeit potentially at a measured pace. This inflationary pressure lends some support to the euro, preventing a significant decline even amidst strong U.S. economic data, that is making it more difficult for the US Federal Reserve to make interest rate cuts, and emerging optimism in U.S.-China trade relations.