The euro is mixed today - the common currency is strengthening against the Japanese yen and the Australian dollar, while weakening against the US dollar and the British pound. Yesterday, the currency was helped by ECB President Draghi's remarks regarding accelerating wages and inflation. Today, the euro is running out of steam as the US dollar rises. The dollar is strengthening following FOMC minutes which suggested more rate hikes in the near future.
While Draghi did not address monetary policy directly in speech yesterday, his upbeat tone regarding inflation suggests a tighter monetary policy stance in the near future. As we have written before, expectations regarding future monetary policy is one of the main drivers behind the common currency today. Growth and inflation data are weakening in 2018, while speculator positioning in the euro looks overly optimistic. As a result, the euro rally has run out of steam in recent months. Our short-term outlook on the euro is neutral, while our medium-term outlook is bullish.
EUR/USD is down slightly and trading above 1.2350. The euro is up slightly against the yen, with EUR/JPY trading above 132.10. Finally, the euro is down against the pound, with EUR/GBP above 0.8710.
Looking at economic data from the Eurozone, traders will be focused on trade balance numbers. German February trade balances (€19.2b vs. €21.4b expected) were lower than expectations. ECB President Mario Draghi suggested that wages and inflation will accelerate this year. Later today, we'll see Eurozone industrial production and see policy meeting accounts from the last ECB meeting. On Friday, we'll see the second-take of German consumer price index figures for March and Eurozone trade balances. Last week, German factory orders and industrial production missed expectations by a wide margin.