Eurozone flash Q1 Gross Domestic Product (GDP) growth remains lower at 0.1%, while it was expected to have risen steadily by 0.2%. Year-on-Year (YoY) GDP growth remains slower-than-projected at 0.8% vs. 0.9% estimates and the previous reading of 1.2%.
Annual Harmonized Index of Consumer Prices (HICP) in the Eurozone, as measured by changes in the prices of a representative basket of goods and services in the European Monetary Union, arrives at 3%, higher than estimates of 2.9% and the March reading of 2.6%. In the same period, the Eurozone’s core inflation – which excludes volatile components like food, energy, alcohol, and tobacco – decelerates to 2.2%, which was estimated to have remained steady at 2.3%.
On a monthly basis, the headline and core HICP rises by 1% and 0.9%, respectively.
(This section below was published at 07:22 GMT as a preview of the Eurozone preliminary Q1 GDP and HICP data for April)
The Eurozone Prelim HICP and GDP Overview
Eurostat will publish the preliminary Eurozone Harmonized Index of Consumer Prices (HICP) for April and Gross Domestic Product (GDP) for the first quarter of 2026 later on Thursday at 09:00 GMT.
Eurozone HICP inflation is expected to inch higher to 2.9% year-over-year (YoY) in April, from 2.6% in March. Meanwhile, the annual core inflation is anticipated to remain consistent at 2.3% in the reported month.
The monthly Eurozone inflation and core inflation were at 1.3% and 0.8%, respectively, in March.
Meanwhile, seasonally adjusted flash Eurozone GDP is projected to rise 0.2% QoQ in Q1, unchanged from the prior reading, while annual growth is seen slowing to 0.9% from 1.2%.
How could the Eurozone Prelim HICP and Q1 GDP affect EUR/USD?
The EUR/USD pair may remain flat if the HICP data come as expected. However, the pair may depreciate further as the Euro (EUR) could struggle amid increased risk aversion, which could be attributed to the geopolitical tensions in the Middle East.
Traders expect the European Central Bank (ECB) to leave interest rates unchanged late in the day, in line with many global peers this week, while signaling that a rate hike, possibly as early as June, may be necessary to counter an energy-driven surge in consumer prices.
The EUR/USD pair could lose ground as the US Dollar (USD) remains firm, which could be attributed to the Federal Reserve (Fed) keeping rates unchanged but striking a more hawkish tone amid rising inflation concerns.
The Federal Open Market Committee (FOMC) voted 8-4 on Wednesday to keep interest rates unchanged within the 3.5%–3.75% range, marking the first instance of four dissenting votes since October 1992. The committee emphasized that “inflation remains elevated, partly due to the recent rise in global energy prices.”
Technically, the EUR/USD pair steadies after recovering daily losses, trading around 1.1680 at the time of writing. The 14-day Relative Strength Index (RSI) around 49 hints at fading bullish momentum and a consolidative bias. The pair is hovering around the 50-day EMA of 1.1678, followed by the nine-day EMA barrier at 1.1700. On the downside, the EUR/USD pair may navigate the region around the eight-month low of 1.1411, recorded on March 13.
Euro FAQs
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day.
EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy.
The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa.
The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control.
Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency.
A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall.
Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period.
If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
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