EUR weakened against most of its major counterparts in the European session on Tuesday as investors responded to the data, which showed that economic confidence decreased more than anticipated this month, hitting the lowest level since December 2024.
According to the European Commission’s report, its economic sentiment indicator for the euro area dropped to 93.6 in April from a downwardly revised 95.0 in March. Economists had forecast the indicator to fall to 94.5. The April reading was the lowest so far this year, reflecting a broad-based decline in confidence across all sectors.
Meanwhile, the European Central Bank reported that consumers’ inflation expectations in the euro area increased in March, with the outlook for the next 12 months jumping from 2.6% in February to 2.9%, the highest since April 2024. Expectations for the next three years edged up to 2.5%, and expectations for the next five years, reported by the ECB for the first time, stood at 2.1%.
In addition, investors assessed the preliminary estimates from Spain - the Eurozone's fourth-biggest economy - on the GDP growth in the first quarter of 2025 and the consumer price index (CPI) for April.
According to the flash data, Spain’s gross domestic product (GDP) rose 0.6% QoQ in the first three months of 2025, following a downwardly revised 0.7% QoQ advance in the fourth quarter. Economists had predicted a 0.7% QoQ gain. Meanwhile, the country’s headline inflation rate held steady at 2.2% YoY in April, disappointing economists who had predicted it to slip to 2.0% YoY.
Markets’ focus is now shifting to the CPI reports from the other major economies of the region, due in the coming few days and Friday’s release of the inflation figures for the entire euro area. Another crucial release will be Wednesday’s report on the Eurozone’s economic growth in the first quarter. All these data might impact the expectations for further interest-rate reductions by the European Central Bank.
Given the continuing retreat in inflation and gloomy prospects for the euro’s economic growth due to U.S. President Donald Trump’s trade policy, markets are now pricing 2-3 additional rate cuts by the end of 2025, with the next coming at the ECB’s June meeting.