Despite stronger economic growth and inflation in the Eurozone, the prospect of an ECB rate cut in June remains on the table.

EURUSD news

The Euro weakened further in Tuesday's trading (30/April) following the release of Eurozone inflation data, which bolstered expectations of an ECB rate cut in June. EUR/USD slipped to the 1.0690s, while EUR/GBP plummeted below the 0.8550 threshold.

Eurostat released a series of significant reports today. Economic growth and inflation in the Eurozone came in slightly higher than consensus forecasts. However, these robust figures haven't altered the outlook for interest rates.

The Eurozone saw a 0.3% (q/q) increase in Gross Domestic Product (GDP) in Q1/2024, signaling a recovery from the -0.1% (q/q) contraction reported previously. Annual economic growth also rose from 0.1% (y/y) to 0.4% (y/y), doubling the consensus estimate.

Consumer prices for all goods groups remained stable at 2.4% (y/y) in April 2024, in line with consensus forecasts. Meanwhile, core inflation slowed from 2.9% (y/y) to 2.7% (y/y), only slightly above the consensus estimate of 2.6% (y/y).

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CNBC reported that experts see these data as strengthening the case for an ECB rate cut in June. However, there's considerable uncertainty regarding future rate cuts as some data points have exceeded consensus estimates.

Gerardo Martinez, European economist at BNP Paribas, told CNBC "With the path from here likely to be bumpy and growth data showing that the eurozone economy is gathering momentum, we think the path beyond June remains more uncertain and we continue to expect a gradual and cautious (quarterly) pace of easing from the ECB," 

The market is now adopting a wait-and-see approach ahead of the Federal Open Market Committee meeting. Consensus expects the Fed to keep interest rates in the range of 5.25%-5.50%, while delivering a somewhat hawkish message. This could support speculation of delaying a rate cut until November or even next year. However, if the Fed delivers a dovish message or supports earlier rate cuts, the US dollar is at risk of falling.