ECB's Vujcic says Croatian inflation eased in May, bolstering expectations for an ECB rate pause and weighing on the euro while lifting eurozone bonds.
German bund prices rallied as the Vujcic comments reinforced expectations of a dovish ECB pivot, driving investors into safe-haven eurozone government bonds. Lower inflation prospects reduce the likelihood of aggressive rate hikes, boosting bond prices.
German 10-year bond yields dipped as prices increased, reflecting market expectations that the ECB will pause rate hikes sooner than previously anticipated.
The dip in yields offers a potential entry for bond investors expecting further ECB dovishness, but caution is warranted as eurozone inflation prints could still surprise on the upside.
The article quotes ECB’s Vujcic forecasting lower Croatian inflation, reinforcing expectations of an ECB rate pause. EUR/USD eased as markets priced in fewer future rate hikes, reducing the euro's carry advantage against the dollar.
The comments suggest inflation is cooling, which reduces the urgency for the ECB to raise rates further, diminishing the euro's yield advantage and pushing EUR/USD lower.
EUR/USD faces immediate resistance at 1.0900 and support at 1.0760. A break below 1.0760 could extend losses toward 1.0700.
ECB Governing Council member Boris Vujcic noted that Croatian inflation likely eased in May, adding to evidence of cooling price pressures across the eurozone. The comment reinforced market expectations that the ECB will pause its interest rate hiking cycle, pulling the euro lower against the dollar. European government bonds rallied, with German 10-year yields declining, as traders priced in a more dovish policy path.
He said Croatian inflation likely eased in May, reinforcing a broader trend of cooling price growth in the eurozone.
The easing inflation data supports arguments for the ECB to pause its rate hikes, potentially as early as the July policy meeting, as inflation moves closer to the 2% target.
Although Croatia is a smaller eurozone member, its inflation data contributes to aggregate eurozone CPI figures, which the ECB monitors closely when setting monetary policy.