The euro is edging towards the softest level of the month as markets hold onto the possibility that the European Central Bank could ease in April. Economists expect that the ECB will want to see the Eurostat wage data release at the end of April, before considering a first move in June. However, the market prefers to listen to the ECB doves, the data showing that activity is soggy and that inflation continues to fall further. The latter will receive more support this week in the form of fourth quarter of 2023 eurozone GDP data confirming a technical recession.

Plus, Wednesday and Thursday will see the national and the eurozone January CPI data. For the eurozone, we forecast a sub-consensus headline reading of 2.7% year-on-year and an on-consensus core reading of 3.2% YoY – the lowest since March 2022. Such an outcome can keep two year EUR:USD swap differentials on their wides near -120/125bp.

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