On Thursday, April 30, the European Central Bank will conduct its regular meeting, after which it is almost certain to maintain its monetary policy parameters unchanged. With a probability close to 100%, the central bank will keep all three key interest rates unchanged. However, this does not mean that the event will be "uneventful." On the contrary, hawkish or dovish tones in the accompanying statement, as well as shifts in the rhetoric from ECB President Christine Lagarde, could significantly influence the European currency. Moreover, conflicting macroeconomic signals allow the central bank to shift its focus either towards persistent inflation risks or to signs of economic slowdown in the Eurozone.

The main intrigue of the April meeting is the ECB's and Christine Lagarde's reaction to the latest inflation data for the Eurozone. Preliminary data for April will be published just a few hours before the meeting, while we currently can only rely on the March figures, which reflect a rather contradictory picture.

Thus, overall inflation in the Eurozone jumped sharply last month, reaching 2.6%, after falling to 1.9% in February. This dynamic was primarily driven by energy, whose prices surged 5.1% year-on-year, following a 3.1% decline in February. Meanwhile, the core CPI index fell to 2.3%, down from 2.3%. This indicates that internal price pressure is indeed weakening. It is also worth noting the slowdown in inflation in the services sector, to 3.2% (from 3.4%). This is a very important point, as services are considered the most inertial component.

But this is just one side of the coin. On the other side are inflation risks that appear more threatening than the "comforting" March data. The main concern is the rise in inflation expectations. On Tuesday, results from a relevant survey were published, placing the ECB in a difficult position. Specifically, inflation expectations for the next year (the next 12 months) soared to 4.0% from a previous value of 2.5%. This is the highest value for the indicator since the end of 2023. Inflation expectations for three years rose to 3.0% (up from 2.5%), while perceived inflation increased to 3.5% (from 3.0%).

This is a troubling signal for the ECB: if consumers expect such a rapid price rise, they typically accelerate current spending (stimulating demand) and demand higher wages, which increases the risk of secondary inflation effects.

In response to the current situation, Lagarde will likely describe the survey results as "concerning" and will attempt to reassure consumers and markets that the ECB will not allow inflation to solidify at the 3-4% level. She could also use more hawkish phrasing, stating that if subsequent data confirms the risks of accelerating inflation, "the central bank will be ready to deploy all available tools."

Additionally, another signal indicates accelerating inflation in the Eurozone. On Wednesday, Germany released preliminary April CPI data. As we know, German and broader European inflation figures demonstrate a high correlation, so Wednesday's release "speaks volumes."

Thus, the overall annual consumer price index in Germany rose to 2.9% in April (up from 2.7% in the previous month), and the month-on-month increase was 0.6%. The harmonized HICP index also accelerated to 2.9% year-on-year (after rising 2.8% in March).

According to preliminary forecasts, the overall CPI in the Eurozone will accelerate to 3.1% year-on-year (up from 2.6%), while the core index will rise to 3.0% (up from 2.3%). Given Germany's inflation dynamics, such a forecast appears quite plausible.

Thus, following the April meeting, the ECB is likely to implement a "hawkish pause" scenario. By keeping interest rates unchanged, the ECB will emphasize the growing inflation risks. Lagarde is unlikely to announce any specific measures, but she may subtly signal readiness for a response.

However, despite this "preview," any price spikes in the EUR/USD pair should be considered as opportunities to open short positions. The market will quickly factor in the outcomes of the April meeting, after which geopolitical concerns will reemerge. The uncertainty surrounding the conclusion of the Middle Eastern conflict and ongoing geopolitical risks will support and continue to sustain demand for the safe-haven dollar. Therefore, under current conditions, the potential for further growth in EUR/USD appears limited—any upward impulses are likely to be corrective.