The euro is mostly higher today - the common currency is strengthening against the US dollar, the British pound and the Japanese yen today. Yesterday, the euro surged after the ECB's Ewald Nowotny told Reuters that the Bank's quantitative easing program would end later this year. He also claimed that the ECB could hike its deposit rate before moving its main interest rates. "I would have no problem with moving from -0.4 percent to -0.2 percent as a first step and then, as a second step, include the (main refinancing) policy rate," he said. Later in the day, the euro gave back some of its gains after an ECB spokesperson said that Nowotny's comments do not represent the views of the Governing Council.
Today, the euro continues to make gains, particularly against commodity currencies such as the Australian dollar. While the euro has traded in a narrow channel in 2018, slowing growth and inflation in the Eurozone suggests a less benign outlook going forward. Beyond hopes for monetary tightening, the list of reasons to buy the euro is fairly limited. Our short-term outlook on the euro is neutral, while our medium-term outlook is bullish.
EUR/USD is up slightly and trading above 1.2310. The euro is flat against the yen, with EUR/JPY trading above 132.370. Finally, the euro is flat 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. Later today, we'll hear a speech from ECB President Mario Draghi. On Thursday, 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.
As the euro runs out of steam, we are downgrading the currency to neutral in the short-term. Looking at various technical indicators, the currency is trading within normal conditions. This is based on a daily chart of the euro currency index.
As the euro continues to strengthen, we are upgrading the outlook to bullish in the medium-term. Note that the euro is currently trading within normal conditions. Our analysis is based on various technical indicators when looking at a weekly chart.