Inflation in the eurozone remained unchanged in April compared to March, fully in line with forecasts—2.2% year-over-year for the headline index, and 2.7% year-over-year for the core index. This inflation stability generally benefits the ECB, which, through comments from Governing Council members, confirmed its gradual shift toward a more dovish stance.

The European Commission released an update to its economic forecasts. Specifically, real GDP growth in 2025 is now expected at 0.9%, down from the November estimate of 1.3%. The downgrade is attributed to increased uncertainty around tariffs. Inflation is projected at 2.1% year-over-year in 2025 and 1.7% in 2026, with the latter revised down from 1.9% to 1.7%, aligning with the ECB's forecasts. This adjustment suggests that the ECB may also lower its forecast in June, signaling a dovish turn.

Overall sentiment is deteriorating. While PMI indices remain relatively stable, they are not improving, and consumer confidence continues to decline.

The ECB adopted a clearly more dovish stance at its April meeting, and since then, officials' comments have mostly echoed this tone. Against this backdrop, another rate cut in June seems highly likely, and further cuts could follow if uncertainty persists and economic momentum weakens further. For now, markets are pricing in a terminal rate of around 2%, implying one more cut in June—but only if the economic situation does not worsen.

There is also some positive news—the EU and the U.S. have finally begun trade negotiations. While there are no concrete outcomes yet, the fact that talks have started eases tensions. It's unclear who will ultimately benefit—the euro or the dollar. The EU initially holds a weaker position, as it is forced to play defense, and the intrigue likely lies in how much the EU will concede. This will influence the euro's prospects.

Net long positions in the euro increased by €1.1 billion during the reporting week, reaching €11.8 billion. Speculative positioning remains firmly bullish, but the fair value estimate is trending downward.

The EUR/USD pair, as expected, spent the week within a trading range, bouncing slightly from the 1.1066 low. There are fewer reasons for growth now; we expect continued range-bound trading with a bias toward a move down to 1.1066. The resistance zone at 1.1260/80 will likely form a local peak, followed by a decline. A move above 1.1260/80 is considered unlikely.