The euro is slightly lower against most major currencies today. The common currency is the weakest against the Canadian dollar, the Australian dollar and the Japanese yen. Yesterday, the euro was down sharply against major peers including the US dollar and the British pound. While disappointing German GDP growth data had a limited immediate impact, the currency moved lower after the US dollar strengthened sharply during US trading hours. Following yesterday's move down, EUR/USD is once again looking oversold.
Turning to recent developments from Italy, 5-Star Movement leader Luigi Di Maio said that talks with the League are almost complete. League leader Matteo Salvini said that European Union budget rules have to be adjusted to allow greater government spending. Di Maio added that this should be done with agreement from fellow members of the EU.
In other news, euro traders will be closely watching upcoming inflation figures from Germany and the broader Eurozone. As both headline and core inflation remains below the ECB's target, President Mario Draghi has warned that monetary stimulus remains necessary. If inflation strengthens above analyst forecasts, expectations for monetary tightening are likely to rise as a result - helping the euro strengthen. Following recent weakness in growth data, this month's economic calendar should provide more cues for the Eurozone's growth outlook this year. So far, most indications point to a continued deterioration. Our short-term and medium-term outlook on the euro is bearish.
EUR/USD is flat and trading above 1.1830. The euro is down slightly against the yen, with EUR/JPY trading above 130.50. Finally, the euro is flat against the pound, with EUR/GBP above 0.8760.
In this week’s euro economic calendar, traders will be watching inflation and growth data. The ECB's Mersch did not address monetary policy. Lautenschläger said that the Eurozone economy was within the ECB's projections. Praet said that the Bank would remain data-dependent. Cœuré said rates are likely to remain at their present level for some time. Finally, incoming ECB member Rehn suggested that growth has cooled. YoY German Q1 GDP growth (2.3% vs. 2.4% expected) missed expectations while YoY Eurozone Q1 GDP growth (2.5%) met expectations. The German ZEW sentiment survey for May (-8.2) met expectations, while Eurozone industrial production for March (3% vs. 3.7% expected) missed expectations. Later today, we’ll see the German consumer price index and the harmonized index of consumer prices for April. We’ll also see headline and core inflation for the Eurozone (April). On Friday, we’ll see the German producer price index and the wholesale price index for April. We’ll also see the Eurozone current account and trade balance for March. Last week, the ECB’s economic bulletin suggested a continuation of monetary stimulus.