The euro continues to strengthen thanks to good economic data and hopes for a grand coalition government in Germany. Looking at economic data, Eurozone unemployment was better than expected while inflation was below estimates. However, German retail sales were far lower than consensus estimates. Looking at coalition news, the BBC is reporting that another meeting is scheduled between the CDU/CSU and SPD today. The talks began yesterday and the euro is rallying on hopes for a grand coalition government committed to reforming the European Union's economy. Our short-term and medium-term outlook on the euro remains bullish.
The EUR/USD exchange rate is now trading above 1.1920. Looking at EUR/JPY, the pair is up today and is currently trading just above 134.20. The euro is up against the pound, with EUR/GBP now trading above 0.8810.
This week's economic data from the Eurozone includes consumer confidence and inflation figures. German consumer confidence missed expectations (10.7 vs. 10.8 expected). Eurozone economic sentiment met expectations (114.6) as did consumer confidence (0.1). German CPI figures were above expectations (1.8% vs. 1.7% expected) while French CPI met expectations (1.3%). German retail sales widely missed expectations (-1.4% vs. 2.8% expected). Eurozone flash inflation was lower than estimates (1.5% vs. 1.6% expected) while unemployment was better than expected (8.8% vs. 8.9% expected). Later today, we'll see German and Eurozone Markit manufacturing PMIs. Last week, strong data helped the ongoing euro rally.
As monetary policy expectations and economic growth power the euro, we are upgrading the outlook to bullish in the medium-term. Note that the euro is trading within normal ranges. Our analysis is based on various technical indicators when looking at a weekly chart.