The euro is slightly higher against major currencies today - the common currency is currently the strongest against the Japanese yen and the US dollar. Yesterday, the euro sold off sharply against the US dollar, while making small gains versus the Japanese yen and the British pound. Thanks to relatively higher US interest rates on comparable government bonds, the euro is becoming less attractive as an investment destination relative to the US dollar.
Turning to recent economic data, Eurzone Markit manufacturing PMIs slowed from previous figures and were slightly below expectations. On the other hand, services and composite PMIs were ahead of expectations. While yesterday's sentiment data was reasonably good relative to expectations, the outlook for Eurozone growth continues to deteriorate. While media reports (such as this Reuters story) claim that the ECB is ignoring weaker economic data, the Bank will struggle to tighten monetary policy in the face of a significant slowdown.
Following the recent sell-off, we will downgrade our short-term outlook to bearish and our medium-term outlook to neutral later today.
EUR/USD is up slightly and trading above 1.2210. The euro is up against the yen, with EUR/JPY trading above 132.940. Finally, the euro is flat against the pound, with EUR/GBP above 0.8760.
Looking at this week’s economic events from the Eurozone, the most important event includes an upcoming ECB interest rate decision. Eurozone manufacturing PMIs for April (56 vs 56.1) were below expectations. Services (55 vs. 54.6 expected) and composite (55.2 vs. 54.9 expected) PMIs were ahead of expectations. Later today, we’ll see IFO expectations for April (from Germany). On Thursday, the most important day, we’ll see the ECB’s latest interest rate decision and hear from ECB President Draghi. We’ll also see May GfK consumer confidence from Germany. On Friday, we’ll get German unemployment figures. We’ll also see a range of sentiment data from the Eurozone for April (services sentiment, economic sentiment, business climate, industrial confidence and consumer confidence). Last week, the ZEW sentiment survey for April was below estimates.