With the region’s flash CPI readings due and the ECB minutes up for release, is the shared currency about to see more weakness? Here’s what you should look out for.
Flash CPI (Apr. 1, 9:00 am GMT)
The spotlight has been on euro zone monetary policy for quite some time and for good reason. Now that signs of a slowdown have emerged and there’s talk of the central bank possibly reviving its easing efforts, market watchers are paying extra close attention to data that might confirm this.
The flash CPI readings would be the first glimpse into the aggregate inflation data for March, and analysts aren’t really expecting big changes. The headline CPI is projected to have held steady at 1.5% while the core reading likely dipped from 1.0% to 0.9%.
Stronger than expected results could signal that the euro zone still has price stability going for it and provide the shared currency a bit of relief. On the other hand, lower than expected readings might accelerate the euro’s declines as this would mean more pressure on the ECB to ease further.
ECB Monetary Policy Meeting Accounts (Apr. 4, 11:30 am GMT)
Even though policymakers agreed to keep rates unchanged last month, the March ECB announcement was anything but cheery. Not only did the central bank slash their economic forecasts, but they also announced a new loan facility intended to support banks.
The minutes of their meeting should shed more light on the factors that influenced their decision, although most of these have already been pretty evident. Emphasis on how risks are still tilted to the downside on account of trade tensions and other geopolitical uncertainties like Brexit could spur another leg lower for the euro.
This release could also contain more clues on their forward guidance, which involves keeping rates unchanged likely until after this summer. However, any indication that they’re still looking to hike around March 2020 might keep losses in check.
Low-tier leading indicators
The rest of the week is filled with low-tier leading indicators, such as final PMI readings from the manufacturing and services sectors of the euro zone’s top economies. These already came in mostly weaker than expected in the latest round, so further negative revisions could spell more downside for the euro.
Germany is due to print its factory orders and industrial production numbers towards the end of the week, and small rebounds are eyed. In particular, the former could show a 0.3% uptick after the earlier 2.6% drop while the latter could print a 0.6% gain after the previous 0.8% decline.
Missed last week’s price action? Read the EUR & CHF price review for March 24-29.