Danske Research Team highlights that EUR/USD traded around 1.16 with Germany Ifo survey is due. Euro area PMIs softened in services while manufacturing was supported by longer delivery times and higher input prices, reinforcing the ECB’s hawkish bias and keeping upward pressure on short-term EUR rates despite weaker growth signals.

ECB hawkish bias supports Euro rates

"In the euro area, the flash composite PMI fell more than expected in March to 50.5 (prior: 51.9), driven by a sharp drop in services to 50.1 (prior: 51.9). Manufacturing rose to 51.4 (prior: 50.8) but this was largely driven by longer delivery times amid supply distortions from the war in Iran. Manufacturing input prices surged to their highest level since September 2022, signalling a surge in cost, while output prices showed a muted increase."

"The print highlights the ECB's dilemma of balancing weaker growth and rising inflation, with communication so far focusing on inflation risks, reflecting a hawkish bias."

"In Germany, the March Ifo survey is due and should offer further insight into preliminary growth and price effects from the war in Iran. Yesterday's PMI readings showed weaker-than-expected services, while manufacturing outperformed. In manufacturing, both new orders and output rose, a positive signal for the sector, but the decline in services and a sharp rise in manufacturing input prices remain concerning."

"EUR/USD traded around the 1.16 level. Upwards pressure on short-term interest rates, in particular on the EUR market, persisted amid more hawkish comments from ECB officials."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)