European Central Bank officials are due to speak early in the week before a blackout period begins on Thursday. Messages indicate the ECB is willing to raise rates if needed, but prefers to wait for more time.
Markets have removed expectations for a 30 April rate rise. They now price roughly a 50% chance of a June hike.
ING expects a rate rise in June. It places a steady level for EUR/USD near 1.17.
Eurozone data releases this week focus on surveys. Germany’s ZEW is due tomorrow, eurozone April PMIs are due on Thursday, and Germany’s Ifo is due on Friday.
March business surveys were stronger than feared. Attention is on whether conditions weakened in April.
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We’re seeing a flurry of comments from European Central Bank officials before their blackout period begins this Thursday. Their message is consistent: they are ready to hike rates if needed but prefer to wait for more data. The market has now priced out a move for the April 30th meeting, with overnight index swaps showing just under a 50% probability of a hike in June, although we still expect them to act then.
This data-dependent stance makes this week’s business surveys especially important, including the German ZEW, eurozone PMIs, and the Ifo survey. While March surveys were surprisingly resilient, we are cautious after recent data showed German industrial production fell by 0.3% in February and headline inflation cooled to 2.7% last month. Any further signs of a slowdown will likely reinforce the ECB’s patient approach.
For derivative traders, this suggests that the upside for EUR/USD is limited, with the pair struggling to sustain moves above the 1.1850 level. Selling short-dated call options or implementing bear call spreads with strikes above 1.1950 could be a strategy to consider, as we see a steady state for the currency closer to 1.17. Implied volatility in one-month EUR/USD options has fallen to 5.8%, near its lowest level this year, indicating the market is not expecting major price swings.
This situation feels different from the clear policy direction we saw for much of last year in 2025. With the US Federal Reserve also on hold, as Fed Funds futures are pricing in virtually no chance of a rate change in the next quarter, a strong directional breakout in the currency pair seems unlikely. This policy convergence between the two central banks supports a more range-bound market for now.
