The euro remains weak, particularly against the US dollar and the pound. Our medium-term outlook on the common currency has been bearish since the recent ECB meeting. Looking at recent news, Italy's 'eurosceptic' Five Star Movement failed to gain control in a recent election in Sicily. Given that Sicily is considered a stronghold for the party, the election results may suggest that pro-EU incumbents are more likely to remain in power. Given the upcoming Italian general elections in 2018, there is a risk of a eurosceptic party rising to power. Despite the outcome of the elections, the euro remains weak.
The EUR/USD exchange rate is trading close to 1.15960. Looking at EUR/JPY, the pair is up slightly today and is currently trading just above 132.30. The euro is down against the pound, with EUR/GBP now trading above 0.8810.
This week’s Eurozone economic calendar includes a fair amount of survey data and trade balance figures. On Monday, Eurozone Markit Composite PMIs beat expectations (56 vs 55.9 expected). Eurozone producer prices were also above expectations (2.9% vs. 2.8% expected). Later today, we’ll see German industrial production and Eurozone retail sales. On Thursday, we’ll see German trade balances. Last week, GDP growth figures exceeded expectations while inflation came in below estimates.
As the euro remains weak following the recent ECB meeting, we are downgrading the currency to bearish 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.