The euro was under pressure versus most of the majors on Tuesday, sending EUR/USD below key trendline support and EUR/GBP below its important 100 SMA as evidence continues to point toward another rate cut by the European Central Bank (ECB) and a move toward quantitative easing. First, the final reading of Q4 GDP was unexpectedly revised to a new record low of -1.6 percent from -1.5 percent, due primarily to downward revisions to gross fixed capital formation (capital goods investment) to -4.0 percent from -2.7 percent. Persistently declines in household spending and exports were also responsible for the weak result, as they fell 0.3 percent and 6.7 percent, respectively. Adding to the GDP figures, ECB Governing Council member George Provopoulos said during an interview that the bank’s benchmark rate could be cut by at least another 25 basis points, as he did not “see 1 percent as a threshold,” and that he would “not exclude that the ECB could go down further from this level if the economic environment deteriorates further.” All told, Credit Suisse overnight index swaps are only pricing in a 22.5 percent chance of 25 basis point cut to 1.00 percent during the ECB’s next meeting, but there is plenty of time for market expectations to shift ahead of that May 7 meeting.
Related Article: Euro Weekly Trading Forecast
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