The euro is trading around $1.08, its lowest point since March 6th, as investors react to recent PMI data and commentary from European Central Bank (ECB) officials. Eurozone private sector activity is growing, but not as strongly as anticipated. Several ECB members have suggested the possibility of a rate cut, potentially as early as April, citing slower-than-expected inflation. Concerns remain regarding weaker economic growth, though the ECB seems disinclined to raise rates even in the face of potential US tariffs.
- The euro hovered around the $1.08 mark, reaching its weakest level since March 6th.
- Eurozone private sector activity expanded at its fastest pace since August, but fell short of market expectations.
- A rebound in manufacturing output was partially offset by a slowdown in the services sector.
- ECB official Cipollone suggested that the case for a rate cut is strengthening.
- ECB official Stournaras stated that all signs point to a rate cut in April.
- President Lagarde cautioned about weaker economic growth but downplayed inflation risks.
- ECB’s de Galhau reinforced the view that the central bank has room to further ease borrowing costs.
The prevailing sentiment points towards a weaker euro in the near term. Economic data indicates moderate growth, but the real driver appears to be the potential for lower interest rates in the Eurozone. The consistent messaging from multiple ECB officials suggests a high probability of monetary easing, which often weakens the currency. While growth concerns exist, the lack of concern about inflationary risks provides further justification for the potential rate cut, adding downward pressure on the euro’s value.