The euro declined after the release of inflation data from France and the GfK report from Germany.

Exactly three years ago, eurozone data showed inflation had risen to 8.1%. Immediately after, policymakers signaled the start of interest rate hikes in the region. By that time, the Federal Reserve had already raised borrowing costs in the U.S. twice. Inflation in the region later hit even higher records, and European Central Bank (ECB) officials were widely criticized for being slow to respond.

Now, however, it is clear that consumer prices are back under control. According to the latest data, inflation in France unexpectedly slowed to a four-year low of 0.6%. Economists forecast Italy's rate to be 1.9% and Germany's at 2.0%.

Overall, if these forecasts are accurate, this could mark the first time since September last year, and only the second time since 2021, that inflation falls to or below the ECB's 2% target in the region's four largest economies—which together account for over 70% of the eurozone's GDP.

In other countries, price growth may remain higher. In April, inflation was 4.1% in the Netherlands and 2.55% in Belgium. These two economies represent just over 11% of the eurozone.

Nevertheless, ECB Vice President Luis de Guindos hinted last week that the moment of victory is approaching, helped by a stronger euro, declining energy prices, and a notable easing in wage pressure. "The disinflation process is ongoing," he said. "Sooner or later, we will be able to sustainably achieve our definition of price stability."

Clearly, the latest data will only strengthen the ECB's conviction that rate cuts are necessary, with the first expected at the upcoming meeting on June 5.

However, the bigger question is how further easing should proceed, and this is where the central bank remains undecided. Officials are aware that U.S. President Donald Trump's trade policies could hit the eurozone hard—especially as rising tensions with the EU could lead to inflationary retaliatory tariffs.

So despite the encouraging consumer price data this month, it may still take some time before policymakers can fully declare their goals achieved.

Goldman Sachs economists expect that Trump administration tariffs will cause a one-time spike in price levels, pushing core PCE inflation to 3.6% later this year. However, they forecast that price pressures will ease again by 2026, due to weak economic growth.

EUR/USD Technical Outlook

Buyers need to reclaim the 1.1375 level. Only then can they aim for a test of 1.1416. From there, a push to 1.1450 is possible, but it would be difficult to achieve without support from major market participants. The furthest upside target remains the 1.1490 high.

In the event of a decline, I expect significant buying interest only near 1.1335 level. If no support appears there, it would be better to wait for a retest of the 1.1300 low or consider long positions from 1.1259.

GBP/USD Technical Outlook

Pound buyers need to break through the 1.3590 resistance level. Only then will they be able to aim for 1.3620, though moving beyond that will be quite challenging. The furthest target is 1.3640.

If the pair declines, the bears will try to seize control around 1.3545. If they succeed, a break below that range would deal a serious blow to the bulls' positions, potentially pushing GBP/USD down to 1.3510, with a further drop toward 1.3475.