It was the kind of recovery that no one saw coming for the Eurozone. A significant rebound in services activity is pulling the region out of the mud, with the French economy stabilizing in April while the German economy grew for the first time in ten months. The Euro rose significantly during the session, with EUR/USD climbing to 1.0695 from around 1.0645 earlier:
EUR/USD Hourly Chart
Against a backdrop of a weakening economy and falling inflation, it was somewhat set in stone that the ECB would cut rates in June. But now, if the economy actually starts to recover, they might have some extra room to maneuver.
In my opinion, I continue to think that the ECB will at least make a first rate cut in June, at least. But it will at least dissuade them from acting too hastily later. The odds of a move in June were reduced slightly to ~63%, down from ~67% before the data was released. So that still fits with a likely surge for June, once Q1 payroll data confirms it next month.
Taking this into account, the euro rebound we are seeing may not have much effect. But at least from the short-term chart above, EUR/USD is once again operating above its 100 and 200 hour moving averages. This sees the short-term bias becoming at least more bullish.
But we will see if the price can hold above last week’s high at 1.0690 for the day. If it doesn’t last, I’m inclined to tone it down for a quick moment.
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