Euro weekly forecast

The Euro jumped up at the start of the week following recent remarks from European Central Bank Chief Economist Philip Lane.

Although markets had speculated about an aggressive monetary unwinding cycle from the central bank in recent months, Lane emphasized that the ECB might refrain from lowering interest rates again in the near future, providing some support for the Euro as investors reduced their expectations of ECB interest rate cuts. However, ongoing political uncertainty following France’s announcement of a snap election limited the Euro's upward potential.

On Tuesday, Germany's most recent ZEW economic sentiment index fell short of expectations, posing challenges for the common currency. The index recorded 47.5 in June, showing a slight increase from the previous month's 47.1, but it missed forecasts of a more substantial rise to 50.

On Wednesday, the Euro remained subdued against its counterparts due to a lack of new data. Meanwhile, investor apprehensions grew over the recent gains made by far-right French political factions leading up to France's forthcoming election, dampening enthusiasm for the common currency. Additionally, a cautiously optimistic market sentiment diminished interest in safe-haven currencies.

On Thursday, the latest German producer price index was released, showing a continued decline for the eleventh consecutive month, with a 2.2% drop in May. This ongoing decrease in price pressures indicates that the ECB is likely to persist with interest rate reductions this year, which could weigh on EUR exchange rates.

On Friday, disappointing preliminary PMI data from the Eurozone put the EUR on the defensive. Slower activity in both the manufacturing and services sectors caused the common currency to stagnate against most of its counterparts, highlighting continued underlying economic weakness across the Eurozone.

Looking forward to this week, Germany’s upcoming Ifo business climate indicator is scheduled for release on Monday. A potential improvement in economic optimism within the Eurozone's largest economy could bolster the common currency. Additionally, the EU leaders' summit on Thursday, following surprising results in the European elections, will be closely scrutinized by analysts for any policy changes aimed at addressing the waning support for governing parties in key Eurozone nations.

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