Wage growth in the eurozone is projected to decline significantly towards the end of the year, signaling a potential shift in economic dynamics. This anticipated decrease in wage growth is expected to alleviate a current key driver of domestic inflation, according to a recent publication by ING. The European Central Bank (ECB) acknowledges the sluggish economy but expresses confidence that inflation is now under control.
In January, base effects that had previously driven inflation higher eased, contributing to a complex economic outlook. Inflation across the eurozone experienced an uptick due to increased energy prices, while food inflation witnessed a decline. Meanwhile, core inflation remained stable at 2.7%, indicating underlying steady inflationary pressures. The ECB remains vigilant as it monitors these developments, aiming to sustain economic stability across the region.
Currency markets reflect this evolving economic landscape, with notable movements in exchange rates. On Monday, EUR/USD remained under bearish pressure, trading below 1.0300. In contrast, GBP/USD showed signs of recovery, rising towards 1.2400 after touching a two-week low of 1.2250 at the week's opening. These fluctuations highlight the ongoing adjustments within the currency markets as they respond to broader economic changes.
The US Dollar, which had previously seen an impressive rally fueled by US President Trump's tariff announcements, experienced a retreat. This shift in momentum contributed to a risk-averse market atmosphere, prompting gold to regain traction. XAU/USD pushed higher towards its record-high set above $2,810 on Friday, driven by investors seeking safe-haven assets amid uncertainties.
It is important to note that the publication by ING was prepared solely for informational purposes and not tailored to any specific user's financial situation or investment objectives. Despite the ECB's outlook on inflation being under control, its acknowledgment of a sluggish economy underscores the need for continued vigilance in managing economic challenges.