The euro is rebounding from its earlier losses relating to the collapse of German coalition talks. Looking at EUR/USD, the pair has already recouped more than half of its losses. As we wrote in a broader commentary on the recent event, the euro remains in a bull market thanks to strong Eurozone growth data. In the short-term, political instability in the Eurozone's largest economy is unlikely to have a significant impact on the common currency. Over the longer term, the euro will ultimately weaken once growth slows down in the future. Our short-term outlook on the euro remains neutral.
The EUR/USD exchange rate is now trading above 1.1770. Looking at EUR/JPY, the pair is flat today and is currently trading just above 131.80. The euro is up against the pound, with EUR/GBP now trading above 0.8880.
This week’s Eurozone events and economic data includes a speech by Draghi, the EU’s financial stability review, Eurozone Markit PMIs and German IFO numbers. On Monday Draghi expressed his optimism for higher wages and backed Germany's stance on EU deposit insurance. German producer prices matched expectations (2.7%). Later today, we’ll see Eurozone consumer confidence. On Thursday we’ll see German GDP and Eurozone Markit PMIs. We’ll also see the ECB’s policy meeting accounts. Lastly, on Friday we’ll see IFO survey data. Last week, Eurozone GDP numbers met expectations.
As Eurozone economic data continues to be strong, we are upgrading our outlook to bullish. Note that the euro is trading within normal ranges. Our analysis is based on various technical indicators when looking at a weekly chart.