The euro remains mostly flat this morning after strengthening last Friday. While news headlines in recent days have suggested that some ECB Governing Council members are turning more hawkish, so far the impact on the currency has been limited. This weekend, Irish Central Bank Governor Philip Lane remarked that "It's important to recognize what we have now is not normal and that it's not going to last for an indefinite period". Given the positive momentum in Eurozone economic data (both growth and inflation have been surprisingly strong in the past few weeks), the outlook for the currency is looking more optimistic. Later today, we will upgrade our medium-term outlook on the euro to neutral.
The EUR/USD exchange rate is now trading above 1.1640. Looking at EUR/JPY, the pair is down today and is currently trading just above 132.10. The euro is up against the pound, with EUR/GBP now trading above 0.8890.
This is a critical week for the Eurozone, given that both GDP and inflation numbers will be announced. On Tuesday, we’ll get the second estimate for Q3 Eurozone GDP growth and industrial production figures. We’ll also see German CPI, ZEW survey numbers and GDP growth figures that day. On Wednesday, we’ll see Eurozone trade balances and French CPI numbers. On Thursday, we’ll see German wholesale prices and Eurozone consumer price index numbers. Last week, Eurozone retail sales, composite PMIs and producer prices all beat expectations.
As the euro rebounds following the disappointment of the recent ECB meeting, we are upgrading our outlook to neutral. While the currency looked overbought earlier, this is no longer the case today and the euro is trading within normal ranges. Our analysis is based on various technical indicators when looking at a weekly chart.