Consumer prices in the eurozone continue to ease, although not at the pace initially forecasted. Inflation slowed down from 2.8% to 2.6% in February, with core inflation exceeding expectations at 3.1% (expected 2.9%). Considering the strong wage growth, there is a risk that year-end inflation may surpass the European Central Bank's forecasts, potentially compelling the Bank to maintain a strict monetary policy for a more extended period than the market anticipates.

PMI indices for the eurozone will be published on Tuesday, with no positive outlook expected – all forecasts suggest that the PMI data will remain in the contraction area. The situation in the first half of 2023, where activity in the service sector increased while the manufacturing sector declined, threatens to repeat itself. Germany has a significant contribution to the slowdown in manufacturing activity, while the situation outside its borders looks noticeably better.

The ECB meeting will take place on Thursday, where new forecasts for GDP growth and inflation are expected. There is a high probability that the 2024 forecasts will be revised downward. Currently, the market forecast assumes that the first rate cut will take place in June, lowering the potential for a yield spread change in favor of the dollar and blocking the expected decline in EUR/USD in the first half of the year, as anticipated by the market a month or two ago.

The net long EUR position decreased by 0.7 billion to +8.5 billion over the reporting week, with the bullish positioning showing negative momentum. However, the price, responding to a noticeable decline in UST yields, continues to confidently look up.

After a short break, the euro is trying to resume the upward movement, with targets at 1.0915 and then a broad area at 1.0970/1000. The probability of a bearish reversal has decreased.