This was the sort of recovery nobody saw coming for the euro area. A major rebound in services activity is dragging the region out of the mud, with the French economy stabilising in April while the German economy expanded for the first time in ten months. The euro has moved up a fair bit on the session now, with EUR/USD climbing to 1.0695 from around 1.0645 earlier:
EUR/USD hourly chart
Amid a weakening economy and inflation trending lower, things were sort of cast in stone that the ECB would cut rates in June. But now, if the economy is really starting to turn around, they might have some added room to work with.
In my opinion, I still think the ECB will at least go with the first rate cut in June at the minimum. But this at least will disincentivise them from acting too hastily after that. The odds of a June move have been reduced slightly to ~63% from ~67% before the data. So, that still fits with a likely push for June once the Q1 wages data confirms it next month.
Taking that into consideration, the euro bounce we’re seeing might not have much legs to it. But at least from the near-term chart above, EUR/USD is working above both its 100 and 200-hour moving averages again. That sees the near-term bias turn more bullish at least.
But we’ll see if price can hold above the high last week at 1.0690 for the day. If that doesn’t last, I’m inclined to fade this move for a quick one.