The euro is currently mixed. The common currency is strengthening against all major currencies except the US dollar and the British pound. Yesterday, EUR/USD ended the day slightly higher and traded above 1.17 for the entire session. Following recent weakness, support for EUR/USD is now at 1.16, while resistance is also lower at 1.18.
Turning to recent developments, the ECB continues to play down the (fairly obvious) slowdown in the Eurozone's fortunes. According to meeting minutes published yesterday: "recent data and survey results pointed to some moderation in the pace of growth since the start of the year, but were so far considered to remain consistent with a solid and broad-based expansion." In a speech, ECB Chief Economist Praet said that weaker-than-expected data was partly because of seasonal factors and supply constraints. He also stated that "some clouds" on the horizon are worth watching.
After running out of steam earlier this week, Italian bond yields are once again rising today (bond prices are falling). In an environment of weak growth, troubles in the Eurozone's periphery threaten the entire bloc. While the ECB may suggest "some moderation" in growth, we argue that growth is already weak and likely to slow significantly. Now that the "Euroboom" is over, expect the currency to be increasingly weighed down by concerns regarding the region's high debts and associated political risks. Our short-term and medium-term outlook on the euro is bearish.
EUR/USD is down and trading above 1.170. The euro is up against the yen, with EUR/JPY trading above 128.20. Finally, the euro is flat against the pound, with EUR/GBP above 0.8750.
On this week’s euro economic calendar, we’ll see a variety of economic sentiment figures. German Markit manufacturing (56.8 vs. 57.8 expected) and composite PMIs for May (53.1 vs. 54.7 expected) were lower than expectations. Markit manufacturing (55.5 vs. 56 expected) and composite PMIs for the Eurozone (54.1 vs. 55 expected) were also lower than expectations. Q1 GDP growth data from Germany (1.6%) met expectations, while June Gfk consumer confidence (10.7 vs. 10.8 expected) were slightly lower than expectations. The ECB's latest communications including its minutes and a speech by Chief Economist Praet downplayed recent weakness in the region. Later today, we’ll see May IFO expectations from Germany. Last week, Q1 German GDP growth missed expectations.