Euro weekly forecast

The Euro had a rough beginning last week, spurred by the release of the Eurozone's most recent manufacturing PMI.

Compounding the Euro's downward pressure in the initial days of the week was the publication of Germany's recent jobs report. Although Germany’s unemployment rate remained unchanged in April, the overall number of unemployed individuals increased to its highest level since March 2021, sparking new worries about the recovery in the Eurozone’s largest economy.

EUR exchange rates stayed under pressure in the middle of the week as growth in the Eurozone’s services sector was adjusted downward in the final services PMI reading for May.

Nevertheless, the single currency managed to stage a recovery in the latter part of the week following the European Central Bank's announcement of its latest interest rate decision.

After concluding its initial policy meeting of the summer, the ECB announced a widely anticipated 25 basis points rate cut.

Yet, since the rate cut had already been extensively factored into market expectations, the subsequent movement in the Euro was predominantly influenced by the bank's forward guidance.

As a result, EUR exchange rates strengthened as the bank lifted its inflation projections for 2024 and 2025 and remained cautious about the likelihood of additional rate cuts. This action seemingly diminished the chances of a subsequent cut in July.

As this week began, the Euro faced pressure following French President Emmanuel Macron's declaration of a snap election in reaction to the unexpected results of the European Parliament election. While Eurosceptic nationalists made significant gains, according to a combined exit poll, centrist, liberal, and socialist parties are anticipated to maintain a majority.

Looking ahead for the Euro, the only significant Eurozone data next week will be the bloc’s latest industrial production figures. However, attention will primarily shift towards politics as France gears up for an election and other key EU states grapple with the aftermath of the European Parliament elections, where governing parties suffered significant losses while right-wing political parties made substantial gains across the board.

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