The Eurozone's final Consumer Price Index (CPI) data for April was released, marking a quiet day on the economic calendar for the region. In addition to the CPI data, speeches from several European Central Bank (ECB) members were on the agenda, including Bostjan Vasle, Luis de Guindos, Boris Vuicic, Robert Holzmann, and Martins Kazaks.

These events come amid market expectations of a potential interest rate cut by the ECB in June, with recent comments from ECB officials suggesting a cautious approach to monetary easing.

The market consensus has solidified around the anticipation of a rate cut in the upcoming month. Despite this, even the more dovish ECB members seem to advocate for a gradual approach to easing policy beyond the initial cut.

The market appears to be comfortable with the current year-end pricing, which reflects an expectation of a 72 basis point reduction in interest rates, and it is unlikely that this sentiment will shift before the ECB's June meeting.

The euro has shown some resilience against the dollar, but it may not have sufficient momentum to push firmly above the 1.0900 level ahead of the weekend. The technical resistance at this level does not appear to be particularly strong.

Meanwhile, the two-year swap rate gap between the US dollar and the euro has narrowed to 140 basis points from a high of 160 basis points in April. However, it remains below the levels seen prior to April.

Looking ahead, the EUR/USD exchange rate is expected to stabilize within the 1.08 to 1.09 range, or it may experience slight downward pressure in the near term. This forecast aligns with the base case scenario for the currency pair as projected by market analysts.

Source : Economy News by Investing.com / May 17, 2024