The euro is slightly higher today after strengthening for several trading sessions in a row. Looking at the common currency against its major peers, the euro is the strongest against the Canadian dollar, the Australian dollar and the US dollar. Note that the euro is currently selling off against the yen, which is benefiting from safe haven flows. As the US dollar weakens on fears of a trade war (the latest catalyst is the resignation of economic adviser Gary Cohn), the euro has emerged as a safe haven. While the euro is not a traditional safe haven, the currency is benefiting from a weaker dollar for now. Over the longer term, the Eurozone is a target for Trump's actions on trade, and is more likely to weaken if Trump instates tariffs. The Eurozone is highly dependent on international trade, particularly manufactured goods. Relative to the United States, trade makes up a larger proportion of the Eurozone's economy. As a result, the Eurozone has more to lose in a trade war relative to the US. Our short-term outlook on the euro is neutral, while our medium-term outlook is bullish.
EUR/USD is up slightly and trading above 1.2410. The euro is down against the yen, with EUR/JPY trading above 131.10. Finally, the euro is up against the pound, with EUR/GBP above 0.8940.
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) were ahead of 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.