The euro strengthened sharply yesterday following economic data that was slightly better than expectations. The euro began rallying following German GDP growth numbers (2.3% year-over-year) which met expectations and continued rallying after Eurozone GDP numbers (2.5%, as expected) and industrial production figures (3.3%, higher than expectations). With the ECB in distant memory and relative political stability, the euro is strengthening thanks to good performance in the region's underlying economy. In late October, we wrote that economics and politics are set to dominate euro trading following the ECB event. Yesterday, we raised our short-term outlook on the euro to bullish.
The EUR/USD exchange rate is now trading above 1.1790. Looking at EUR/JPY, the pair is down today and is currently trading just above 133.30. The euro is up against the pound, with EUR/GBP now trading above 0.8960.
This is a critical week for the Eurozone, given that both GDP and inflation numbers will be announced. Eurozone GDP numbers met expectations (2.5%) while industrial production numbers beat expectations (3.3% vs. 3.2% expected). German GDP growth (2.3% vs. 2.3% expected) and inflation figures (1.5% vs. 1.5% expected) both met expectations. On Wednesday, we’ll see Eurozone trade balances and French CPI numbers. On Thursday, we’ll see German wholesale prices and Eurozone consumer price index numbers. Last week, Eurozone retail sales, composite PMIs and producer prices all beat expectations.