Eurozone Economic Sentiment Indicator Falls to 95.6 in April

On Monday, April 29, sentiment toward the Eurozone economy warranted investor attention amidst expectations of a June ECB rate cut.

Eurozone Economic Sentiment Indicator Falls to 95.6

In April, the Eurozone Economic Sentiment Indicator unexpectedly declined from 96.3 to 95.6. Economists forecast an increase to 96.9.

According to the April Business and Consumer Survey,

• Consumer confidence improved, with the Consumer Confidence Indicator rising from -14.9 to -14.7.
• The Employment Expectations Indicator (EEI) fell by 0.7 points to 101.8.
• Consumer sentiment toward inflation eased, with the Consumer Inflation Expectations Indicator falling from 12.3 to 11.6.
• Services Sentiment trended lower, with the Services Sentiment Indicator declining from 6.3 to 6.0.

Economic Sentiment and June ECB Rate Cut Puts

A modest improvement in consumer sentiment is unlikely to temper investor expectations of a June ECB rate cut.

However, the softer Consumer Inflation Expectations and Services Sentiment Indicators support a June ECB rate cut. The services sector figures will attract the ECB’s attention. The services sector is a focal point vis-à-vis euro area inflation. Deteriorating demand conditions could fuel investor bets on multiple ECB interest rate cuts.

EUR/USD Reaction to Eurozone Business and Consumer Surveys

Before the Business and Consumer surveys, the EUR/USD fell to a low of $1.06906 before rising to a high of $1.07337.

In response to the Business and Consumer surveys, the EUR/USD rose to a high of $1.07062 before falling to a low of $1.06988.

On Monday, April 29, the EUR/USD was up by 0.14% to $1.07055.

Up Next

German inflation figure for April will attract investor attention amidst rising investor bets on a June ECB rate cut. Economists forecast the annual inflation rate to increase from 2.2% to 2.3%. Softer-than-expected numbers could fuel speculation about a July ECB rate cut.

ECB chatter also needs consideration. ECB Vice President Luis de Guindos is on the calendar to speak. Views on inflation and interest rate plans beyond June need consideration.

On the US economic calendar, the Dallas Fed Manufacturing Index will be in focus. Economists forecast the Index to increase from -14.4 to -11.0 in April.

The numbers could influence expectations of the US economy to avoid a recession. However, the Index is unlikely to affect the Fed rate path. The manufacturing sector contributes less than 30% to the US economy. Wage growth, consumer spending, and the services sector are the focal points for the Fed.