The euro is mostly lower today. The common currency is selling off against all major currencies except the British pound and the Japanese yen. Yesterday, the euro weakened after German inflation and German retail sales were both below consensus estimates. Eurozone broad money supply (M3) was also below estimates, indicating lower confidence as credit growth stalls. In the short-term, the euro is likely to enjoy a relief rally (particularly against the US dollar), as the dollar is looking overbought.
As more economic indicators point to slowing growth in the Eurozone, the euro is suffering as a result. Even in the region's largest and most powerful economy (Germany), both businesses and consumers have decreased spending while becoming less confident about the future. While the ECB continues to see relatively high growth this year, most forward-looking indicators point to a sharp slowdown in the region. As the year progresses, we expect Eurozone GDP growth to continue slowing. Our short-term outlook on the euro is bearish, while our medium-term outlook remains neutral.
EUR/USD is down slightly and trading above 1.2060. The euro is up slightly against the yen, with EUR/JPY trading above 132.0. Finally, the euro is flat against the pound, with EUR/GBP above 0.8770.
Looking at this week’s economic events from the Eurozone, the most important data releases include manufacturing sentiment and inflation figures. MoM German retail sales for March (-0.6% vs. 0.8% expected) and the German harmonized index of consumer prices for April (1.4% vs. 1.5% expected) missed expectations. Tomorrow, we’ll see Eurozone Markit manufacturing PMIs for April, as well as Eurozone Q1 GDP growth. We’ll also hear a speech from the German Bundesbank’s Weidmann. On Thursday, we’ll see the Eurozone consumer price index for April and producer prices for March. We’ll also hear speeches from the ECB’s Constancio and Cœuré. On Friday, we’ll see Markit services and composite PMIs for April. We’ll also see Eurozone retail sales for March and hear another speech from the German Bundesbank’s Weidmann. Last week, the ECB failed to meet expectations regarding future monetary tightening.