The euro is currently slightly higher against all major currencies except the British pound. Yesterday, the euro surged to 3-1/2 month highs against the US dollar but ended the day flat. Notably, trading volumes in euro futures were fairly light compared to 30-day averages, and decelerated relative to the previous session. Today's EUR/USD trading range is 1.1540 - 1.1830.
In a speech yesterday, ECB President Mario Draghi described inflation as "relatively vigorous". The statement suggests that monetary policy in the Euro area is likely to become tighter. Accordingly, expectations for a 10 basis point (0.10%) rate hike moved up from October 2019 to September 2019. While the euro initially moved up sharply, the currency was unable to maintain its gains. Earlier today, ECB Chief Economist Praet said that Draghi's comments did not include any new information. Praet's comments were more moderate, as he continued to advocate for monetary stimulus given weak growth and inflation in the region.
While some ECB speakers are calling for tighter monetary policy, economic data from the region continues to deteriorate. The IFO survey, a measure of German business sentiment, decelerated relative to the previous monthly figures. While sentiment moved up sharply a few months ago, the latest figures suggest that sentiment is once again weakening. Last week, manufacturing PMIs (another measure of sentiment) also deteriorated relative to the previous month. Business sentiment is a good leading indicator for economic growth. As the picture for growth deteriorates, our outlook on the euro remains bearish.
EUR/USD is up slightly and trading above 1.1760. The euro is up slightly against the yen, with EUR/JPY trading above 132.70. Finally, the euro is down slightly against the pound, with EUR/GBP above 0.8940.
|September 24||Germany Ifo Business Climate SEP||103.7||103.9|
|September 24||Germany Ifo Expectations SEP||101||101.3|
|September 24||ECB President Draghi Speech|
|September 24||Bundesbank Wuermeling Speech|
|September 25||Germany Wholesale Prices YoY AUG||3.8%||3.6%|
|September 26||ECB Non-Monetary Policy Meeting|
|September 27||Germany GfK Consumer Confidence OCT||10.5|
|September 27||Eurozone Business Confidence SEP||1.22|
|September 27||Eurozone Services Sentiment SEP||14.7|
|September 27||Eurozone Economic Sentiment SEP||111.6|
|September 27||Eurozone Industrial Sentiment SEP||5.5|
|September 27||Germany Harmonised Inflation Rate YoY Prel SEP||1.9%|
|September 27||Germany Inflation Rate YoY Prel SEP||2%|
|September 27||ECB Praet Speech|
|September 28||Germany Retail Sales YoY AUG||0.8%|
|September 28||Germany Markit Manufacturing PMI Final SEP||55.9|
|September 28||Eurozone Markit Manufacturing PMI Final SEP||54.6|
|September 28||Eurozone Unemployment Rate AUG||8.2%|