The euro is mostly lower today after rebounding yesterday. The common currency is selling off against the US dollar, British pound and the Canadian dollar. ECB minutes released yesterday indicated that policy makers felt it was too early to communicate a move towards less accommodative monetary policy. However, minutes did suggest that the ECB is increasingly confident regarding its outlook for inflation. As economic growth across the Eurozone has improved lately (a topic we covered in a broader commentary on the euro), expectations are rising for the ECB to signal an end to its asset buying program. As Northern European countries are losing patience with the ECB's easy-money policies, the Bank is more likely to exit its asset buying program in the second half of this year. Turning to data, Germany's IFO survey broadly missed consensus estimates yesterday. Recent data from the Eurozone has been surprisingly weak following strong growth last year. While figures suggest ongoing expansion, the consensus has consistently overestimated the pace of future growth. Our short-term outlook on the euro is neutral, while our medium-term outlook is bullish.
EUR/USD is currently down slightly and trading above 1.230. The euro is up slightly against the yen, with EUR/JPY trading above 131.70. Finally, the euro is down against the pound, with EUR/GBP above 0.8820.
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. Composite PMIs (57.5 vs. 58.5 expected) missed consensus estimates. German IFO survey expectations (105.4 vs. 107.9 expected) were below consensus estimates. The ECB’s January meeting minutes suggested caution regarding normalizing monetary policy. Later today, we’ll see Q4 German GDP growth and the Eurozone consumer price index. Last week, German consumer prices met expectations.