(MENAFN- Daily Forex)
The EUR/USD currency pair has risen to a resistance level of 1.0895, the highest level in nearly two months, as expectations of a convergence in monetary policy between the US and Europe grow. Moreover, the European Central bank is expected to cut interest rates at its upcoming meeting on June 6, with market expectations pointing to a potential 70 basis point cut over the year.
Similarly, speculation is mounting that the US will cut interest rates this year after core inflation slowed in April/May for the first time in six months. Meanwhile, recent GDP data for the eurozone has confirmed that it emerged from recession in the first quarter, and the latest European Commission forecasts point to a smooth economic path ahead.
According to the results of the economic calendar data, EU GDP growth has improved, and inflation is expected to decline. Furthermore, the European Commission's Spring 2024 forecast expects GDP growth of 1.0% for the EU in 2024, a slight improvement from the 0.9% expected in the Winter 2024 report. Also, Eurozone growth expectations remain steady at 0.8%. Looking to 2025, the EU is expected to achieve a growth rate of 1.6% (down from the winter forecast of 1.7%), while the Eurozone is expected to grow by 1.4% (compared to the previous estimate of 1.5%).
Most member states are expected to see growth in 2024, with Germany expected to grow by 0.1%, France by 0.7%, and Italy by 0.9%. In terms of inflation, HICP rates are expected to decline, with EU inflation falling from 6.4% in 2023 to 2.7% in 2024 and then to 2.2% in 2025. In the eurozone, inflation is expected to fall from 5.4% in 2023 to 2.2% in 2024, 2.5% in 2024, and 2.1% in 2025, reflecting a downward revision from previous winter forecasts. In 2023, the eurozone economy expanded by 0.4%, down from 3.4% growth in 2022.
At the level of stock trading platforms, the German DAX index continued its gains and rose by 0.5% to break a record level at 18,800 on Wednesday, tracking a general positive mood, as traders absorb the main economic data to gauge economic and monetary policy expectations. Ultimately, New GDP estimates for the Eurozone confirmed that the economy emerged from recession in the first quarter, and new expectations from the European Commission still point to a soft-landing scenario.
Elsewhere, corporate news remains a driver, with Commerzbank (+3.5%) announcing a better-than-expected 29% increase in first-quarter net profit. In contrast, Allianz shares fell around 1.7% as its results failed to impress investors, and ThyssenKrupp shares lost more than 7% after the company once again cut its sales and earnings forecasts.
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EUR/USD Technical analysis and forecast:
Based on the performance on the daily time frame chart , the EUR/USD price is in an upward channel. The confirmation of a general trend reversal will come by moving towards the psychological resistance level of 1.1000, which could happen if the bulls move above the 1.0940 resistance today. Today, the focus will be on the announcement of the weekly US jobless claims, as well as housing market and industrial production figures. Additionally, there will be continued reaction to yesterday's announcement of US inflation and retail sales figures. Conversely, on the same time frame, hopes for an upward move will evaporate if the currency pair moves towards the support level of 1.0760 again.
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