The euro has continued to strengthen but still carries some risks.

There is an expectation from analysts that the European Central Bank (ECB) will raise interest rates by another 0.25% to 4.25% due to persistent inflationary pressures below the target level. On the other hand, the United States predicts inflation at 3.1%, down from the previous 4%, which means the Federal Reserve (FED) will only need to make a few more interest rate adjustments. These factors have contributed to the recent depreciation of the US dollar. Regarding the performance of government bonds in the Eurozone, there has been a slight decrease in yields. The 10-year government bond yield for Germany decreased by 0.02% to 2.62%, which is lower than the four-month high of 2.679%.

ECB Vice President, Luis de Guindos, stated that "the price pressures experienced in the recent period in the Eurozone will gradually ease, and the past interest rate hikes are already beginning to have an impact on the overall economic system. Although the majority of indicators have started to show significant signs of slowing down, inflation expectations and underlying inflationary pressures are also decreasing."

However, the fact that the Eurozone still faces high inflationary pressures necessitates further interest rate hikes from the ECB, and the fight against inflation is not yet over until the target level is reached. The ECB will closely monitor inflation in the service sector and labor costs, as they are important factors that could rapidly increase overall inflation and require more substantial interest rate hikes than before.

In normal circumstances, exports in the Eurozone have already been performing poorly. However, the lifting of COVID-19 containment measures by China should be another significant factor that helps boost the Eurozone's economy. But the recent slowdown in China's economy, including its growth, may not be as strong as before. This could worsen the situation in the Eurozone and potentially lead to downward revisions of future expectations.

Additionally, there has been an announcement by the Eurozone finance ministers that they will agree today to end energy support measures to various countries and assist the ECB in controlling inflation. It has been emphasized that excessive energy support during the past years due to war crises and COVID-19 has caused a significant imbalance. It has been further emphasized that governments should have better budget controls to be prepared for unforeseen events. However, even in such a scenario, if an energy crisis occurs again, leading to higher prices, it would be necessary to support energy prices to prevent excessive inflation.

Techical analysis data (5H)