The German ZEW surveys published today are the first activity indicators to be released in the eurozone since 'liberation day'. Remember that respondents are financial market experts, not business managers like the Ifo. Consensus is for a big drop in the expectation gauge from March’s 52 to 10 on the back of tariffs. However, some responses may have been collected before the tariff pause announced last Wednesday by Trump. Markets may not dwell too much on a soft figure, ING's FX analyst Francesco Pesole notes
Markets are pricing in 75bp of total ECB easing this year
"EUR/USD is overbought and overvalued, but we have observed strong buying interest around 1.130, and we still think the near-term bias is towards 1.15 rather than 1.12 from the current 1.135. After all, the USD slump remains largely a function of the loss of the USD's appeal as a reserve/safe-haven asset, and the euro’s high liquidity character should continue to absorb a lot of the rotation. The major risk at this stage is perhaps very dovish signals by the ECB as it cuts tomorrow, although markets are pricing in 75bp of total easing this year, so the bar is set relatively high."
"Elsewhere in Europe, the UK released jobs figures for March this morning. Payrolls fell more than expected, extending 2024's modest private-sector downtrend, though these numbers often see upward revisions. Despite survey warnings, there's little hard evidence yet of the employer tax hike triggering layoffs. Wage growth came in softer than consensus, but underlying private-sector pay dynamics remain firm. With unemployment data still unreliable, payrolls are the key metric to watch. Bottom line: nothing here to shift the BoE's stance. We stick to our call for a May rate cut, followed by quarterly cuts into 2026."
"With ECB and BoE upcoming cuts (tomorrow and in May) fully in the price, EUR/GBP remains almost solely a function of risk sentiment. EUR’s safe-haven appeal means further selloffs will take EUR/GBP back higher. Equity futures point to more tentative stabilisation, meaning the pair can continue hedging lower towards 0.850, also helped by the ECB’s moving first on easing."
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