The euro is mostly higher today. The common currency is currently the strongest against the US dollar and the Canadian dollar. Note that the euro is selling off against the yen, as the yen strengthens thanks to safe haven flows and renewed political concerns in Japan. Yesterday, the euro was much weaker against most currencies (especially the US dollar and the British pound) without any significant catalysts. Today, the currency is making up some of its previous losses.
Turning to recent events, the ECB's Lautenschlaeger said that Eurozone banks must be allowed to fail in a speech yesterday. She argued that taxpayers must not be on the hook for bank failures. While the Eurozone has instituted a "bail-in" system (whereby investors and account holders are the first to face bank losses), Italy has promised to provide direct support to struggling lenders in violation of Eurozone rules. Our short-term outlook on the euro is neutral, while our medium-term outlook is bullish.
EUR/USD is up slightly and trading above 1.2310. The euro is down against the yen, with EUR/JPY trading above 130.40. Finally, the euro is up slightly against the pound, with EUR/GBP above 0.8830.
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. The German harmonized index of consumer prices (1.2%) and the consumer price index for February (1.4%) met expectations. YoY Eurozone industrial production (2.7% vs. 4.7% expected) missed expectations, while employment change figures (1.6%) met expectations. ECB speakers including Draghi and Praet suggested a continuation of the status quo. The ECB's Lautenschlaeger stated that banks must be allowed to fail. Later today, 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.