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Euro mostly higher as risk-on currencies rebound

Euro daily update


Euro daily update

The euro is mostly higher today. The common currency is the strongest against the Japanese yen and the US dollar. The euro rose sharply yesterday after the US dollar sold off following US inflation data. As US growth accelerates while inflation remains moderate, the dollar is more likely to continue weakening. As a result, the euro is likely to keep strengthening in relative terms. Later today, we'll see industrial production growth from the Eurozone. As forward-looking indicators (such as sentiment surveys) suggest a weaker pace of growth in the Eurozone, there is a good chance that industrial production growth is lower than consensus growth estimates. Most indicators suggest a slowing pace of growth in the Eurozone this year. If the slowdown becomes more severe in the future, expect the euro to weaken accordingly. Our short-term outlook on the euro is neutral, while our medium-term outlook is bullish.  

EUR/USD is up slightly and trading above 1.2390. The euro is up against the yen, with EUR/JPY trading above 132.0. Finally, the euro is flat against the pound, with EUR/GBP above 0.8870.

This is relatively light week for economic data from the Eurozone. Eurozone finance ministers agreed on a Greek bailout package and financial stability mechanism at the most recent Eurogroup meeting. Later today, we'll see the German harmonized index of consumer prices and the consumer price index for February. From the Eurozone, we'll get industrial production and employment change figures. The ECB's Draghi and Praet will also be speaking today. On Thursday, the ECB's Lautenschlaeger will deliver a speech. On Friday, we'll see German wholesale prices and the Eurozone consumer price index and labor costs. Last week, ECB President Draghi disappointed speculators looking for a more hawkish outlook on monetary policy. 


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