Euro slightly higher as global risk sentiment improves

Euro daily update


Euro daily update

The euro is slightly higher today after strengthening yesterday. Looking at the euro against major peers, it is currently the strongest against the Canadian dollar and the British pound. While the euro dipped yesterday following Italian election results, the common currency rallied shortly thereafter thanks to improving risk sentiment. Most European stock markets ended the day higher yesterday. Overnight, US and Asian stock markets have also rallied. In general, the euro tends to benefit from rising risk sentiment. Turning to economic data, PMI and investor confidence surveys missed expectations yesterday. On the other hand, year-over-year retail sales were slightly better than estimates. After peaking a few months ago, the outlook for Eurozone growth appears to be cooling. As we wrote in a longer  commentary on the euro, this considerably weakens the bullish case for the currency. Our short-term outlook on the euro is neutral, while our medium-term outlook is bullish.  

EUR/USD is currently flat and trading above 1.2330. The euro is up slightly against the yen, with EUR/JPY trading above 131.0. Finally, the euro is up against the pound, with EUR/GBP above 0.8910.

Looking at economic data from the Eurozone this week, we'll see Q4 GDP figures and hear from the ECB at an upcoming monetary policy meeting. Eurozone Markit composite PMIs (57.1 vs. 57.5 expected) and Sentix investor confidence (24 vs. 31 expected) both missed expectations. YoY Eurozone retail sales (2.3% vs. 2.1% expected) missed expectations. Later today, we'll see the second take of Q4 GDP for the region. On Thursday, the most important day, we'll hear ECB President Mario Draghi deliver the monetary policy statement and answer questions at a press release. On Friday, we'll see German industrial production and trade balances. Last week, Eurozone Markit manufacturing PMIs and headline inflation met consensus estimates.