The euro strengthened yesterday and is currently flat. The currency has been very strong in the recent past thanks to improving economic data. Despite the upset following the collapse of German coalition talks, markets have pushed the euro higher. Market PMI surveys showed that both Eurozone manufacturing (60) and services (56.2) continue to expand. Given the Eurozone's current rate of expansion, fourth quarter GDP growth may approach 3%. Strong growth is a surprise for many given the length of the Eurozone's current economic upswing. We upgraded our medium-term outlook on the euro to bullish on Tuesday earlier this week. Our outlook remains bullish.
The EUR/USD exchange rate is now trading above 1.1840. Looking at EUR/JPY, the pair is up today and is currently trading just above 132.0. The euro is up against the pound, with EUR/GBP now trading above 0.8910.
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%). Eurozone consumer confidence was stronger than expected (0.1 vs. -0.8 expected). German Q3 GDP growth missed expectations (2.3% vs. 2.6% expected), while Eurozone Markit PMIs were better than estimates (57.5 vs. 56 expected). ECB minutes suggested that the Governing Council was split about keeping its bond buying program open-ended. Later today, 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.