The euro is mostly flat today, and remains stuck trading sideways. The big event for the common currency is the upcoming ECB meeting this Thursday. Given high expectations for the ECB to begin tapering its quantitative easing program, trading in the euro is likely to remain subdued. Yesterday, Markit manufacturing and services PMIs suggested that the Eurozone continues to grow (albeit below expectations). Manufacturing PMIs beat estimates, while services and composite PMIs came in below expectations. Later today, we'll see German survey data of economic conditions in the Eurozone's largest economy. Initial estimates suggest a strong outlook for the German economy.
The EUR/USD exchange rate is now below 1.1760. Looking at EUR/JPY, the yen remains weak against the euro. The pair is currently trading just below 134. The euro is up slightly against the pound today (after rising sharply yesterday), with EUR/GBP now trading below 0.8970.
Given the upcoming ECB meeting this Thursday, this is a big week for the euro. On Tuesday, Eurozone Manufacturing PMIs beat expectations (58.6 vs. 57.8 expected) while services and composite figures were below estimates (55.9 vs. 56.5 expected). On Wednesday, we'll get IFO survey results for German economic conditions. On Thursday, the ECB is expected to make a policy statement and stage a press conference. Given high expectations for the ECB to begin tapering its quantitative easing program, the statement and the press conference will be closely followed by financial markets.
After rallying in the second week of October, our medium-term outlook on the euro is now neutral. The currency is appreciating as the ECB is expected to announce its decision to taper quantitative easing next year. Recently, Catalonia's president also avoided a unilateral declaration of independence, choosing instead to call for dialog while accepting the mandate of the referendum. While the currency looked overbought in mid-October, this is no longer the case today and the euro is trading within normal ranges. This is based on various technical indicators when looking at a weekly chart.