Investing.com — On Monday, the upcoming release of the Purchasing Managers’ Index (PMI) reports is expected to shed light on current economic growth sentiment in the Eurozone. The manufacturing and services sectors are both expected to show signs of improvement, although output is forecast to remain below the expansion threshold. The services sector, on the other hand, is likely to show further growth, adding to economic optimism in the region.
The euro has appreciated slightly, driven by positive domestic growth prospects. However, the future trajectory of the euro depends not only on the PMI results, but also on the European Central Bank’s (ECB) response to these indicators. The ECB’s approach to its monetary easing policy, especially after the expected rate cut in June, will be crucial. Nevertheless, recent market pricing for the ECB showed minimal volatility.
The euro’s rally to 1.09 is seen by some as somewhat excessive given ongoing concerns about the US disinflation story. A consolidation between 1.08 and 1.09 is considered more likely than a significant increase above these levels. Nevertheless, the market has reacted to several data releases, indicating a sensitivity to economic indicators, even if the reactions were temporary.
The possibility of the euro reaching or even slightly exceeding the 1.0900-1.0950 range cannot be ruled out, especially if the Eurozone PMI data outperforms that of the United States. The upcoming PMI reports and ECB President Christine Lagarde’s two speeches this week are highly anticipated events that could influence the euro’s valuation and the ECB’s monetary policy decisions.
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