Focus back on the Euro. Economists at Commerzbank analyze the single currency outlook.
Euro might suffer a dampener if Eurozone PMIs do not stabilise
The Eurozone PMIs, due for publication today, are likely to further dampen any hopes of an economic recovery. The indicators are likely to confirm the projections of our experts that the Eurozone economy will shrink in the second half of the year. That means that if the indicators do not stabilise and instead might even surprise to the downside, the Euro might suffer a dampener.
What the ECB does this week is not necessarily decisive. The question seems to be how long key rates will remain at current levels before easing again. The market sees a likelihood of that happening as early as the spring. If the PMIs were to confirm this expectation, the Euro might come under downside pressure today. And if the ECB then also sounds cautious on Thursday regarding the future economic outlook, the Euro might suffer even more.
Our experts, on the other hand, do not expect the ECB to cut its key rate in 2024. That is likely to support the Euro if the market then has to adjust its expectations, but that is likely to be some time off yet so the EUR might suffer due to rising rate cut expectations as a result of weaker economic data.
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