Euro: PMIs to provide Eurozone expansion health check

Euro daily update


Euro daily update

The euro is once again mixed today. The common currency is currently slightly lower against the US dollar and the Canadian dollar. The euro is gaining against the Japanese yen and the Australian dollar. Today is a critical day for the currency thanks to upcoming survey data. Given the importance of manufacturing for the Eurozone (an issue we described in greater detail in a recent  commentary), strong manufacturing PMIs should bode well for the currency. Previous figures (58.6) were very strong, and another strong print today is likely to push the euro higher. Looking at euro trading, the currency is running out of bullish momentum in the short-term. While our short-term outlook remains bullish, we are more likely to downgrade our outlook to neutral if the euro does not resume strengthening. Looking at futures and options data this week, speculators have substantially reduced their net long positions in the common currency. Now that bullish sentiment is no longer looking over-extended, the euro can keep pushing higher. In the medium-term, our outlook on the euro remains bullish and is set to remain bullish for the next several weeks. 

EUR/USD is currently flat and trading above 1.2330. The euro is up against the yen, with EUR/JPY trading above 132.80. Finally, the euro is flat against the pound, with EUR/GBP above 0.8810.

Looking at economic data from the Eurozone this week, we’ll see a fair number of sentiment surveys and the Eurozone consumer price index. Spain’s Luis de Guindos was selected to be the next European Central Bank Vice President at the Eurogroup meeting. German producer prices were above expectations (2.1% vs. 1.9% expected). Eurozone consumer confidence missed estimates (0.1 vs. 1 expected), but the ZEW survey (29.3 vs. 28.4 expected) for the monetary union was ahead of expectations. Later today, an ECB meeting (non-monetary policy related) is scheduled. We’ll also see Markit PMIs (services, manufacturing and composite). Tomorrow, we’ll see IFO survey data from Germany and see the ECB’s monetary policy meeting accounts. Friday is the most important day. We’ll see Q4 German GDP growth and the Eurozone consumer price index. Last week, German consumer prices met expectations.