The euro is flat against the dollar today but continues to weaken relative to the pound. Despite yesterday's sentiment survey numbers, which beat expectations, German CPI data was disappointing. Relative to expectations for 1.7% CPI, actual year-over-year CPI came in at just 1.6%. As inflation in the Eurozone's largest economy remains muted, hopes for ECB policy action remain subdued. Similar to its US counterparts, German bond yields are falling on the result - leading to further currency weakness. Today is another critical day for the Eurozone, as GDP and unemployment numbers are set to be announced in a few hours.
The EUR/USD exchange rate is now below 1.17 and is trading close to 1.1640. Looking at EUR/JPY, the pair remains weak and is currently trading just above 131.60. The euro continues to weaken against the pound, with EUR/GBP now trading below 0.8810.
This is a fairly critical week for the Eurozone, with lots of important data on the weekly schedule. German retail sales (4.1% vs. 3.0% expected) beat expectations while CPI (1.6% vs. 1.7% expected) missed. Eurozone economic sentiment also beat expectations (114 vs. 113.4) while consumer confidence met expectations (-1 vs -1 expected). Later today, we’ll get Eurozone Q3 GDP numbers, inflation and French unemployment rates. Finally on Thursday, we’ll see German unemployment and German Markit manufacturing PMI. Last week, The ECB failed to meet the market's tapering expectations, choosing instead to reduce the scope of the existing program without defining a clear end date.
After the euro enjoyed a small rebound, we are upgrading the euro to neutral in the short-term. Looking at various technical indicators, the currency is neither oversold nor overbought and is trading within normal conditions.
Following the ECB meeting, our medium-term outlook on the euro is back to bearish. 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.