Spain in the Spotlight: The Euro awaits Spain’s March inflation estimates today. While not typically a market mover, past deviations from expectations have caused volatility. Consensus predicts headline inflation to climb above 3% again, with core inflation dipping slightly (3.5% to 3.4%). The rest of the eurozone will see inflation data trickle in next week, with Germany and the overall eurozone following Easter break.
French Deficit Higher Than Expected: France made headlines yesterday with a higher-than-anticipated 2023 budget deficit (5.5% vs. target of 4.9%). Lower tax revenue and softer GDP in the second half of 2023 were mainly to blame. Analysts predict a similar deficit for 2024.
Euro Unfazed: Despite the French deficit, the Euro remains resilient as bond spreads (OAT) barely budged. Fiscal concerns might resurface closer to France’s September budget, but the European Central Bank’s (ECB) easing measures are expected to create a favorable environment for eurozone bonds.
Euro’s Outlook: Major catalysts for a significant EUR/USD move are unlikely this week, barring a surprise in Friday’s US core PCE data (expected at 0.3% month-on-month). The Euro is likely to stabilize around 1.0850.