The euro was weaker yesterday but is making up some lost ground this morning. Looking at economic data, Markit Composite PMIs met expectations, while year-over-year retail sales widely missed expectations. To some extent, the weak retail sales figures were expected given weakness in German numbers earlier in the week. Looking at political news, Jean-Claude Juncker is set to outline proposed reforms to the Eurozone later today. According to Bloomberg, his proposal includes strengthening the European Stability Mechanism, introducing a dedicated Eurozone budget and the creation of a finance minister for the Eurozone. As Macron rises in prominence relative to Angela Merkel (given her poor performance in recent elections), calls for deeper Eurozone integration are set to grow. Our short-term and medium-term outlook on the euro remains bullish.
The EUR/USD exchange rate is now trading above 1.1830. Looking at EUR/JPY, the pair is down today and is currently trading just above 132.80. The euro is up against the pound, with EUR/GBP now trading above 0.8820.
This week’s Eurozone events and economic data includes PMIs, Eurozone GDP, and producer prices. Eurozone producer prices missed expectations (2.5% vs. 2.6% expected). Eurozone Markit Composite PMIs met expectations (57.5) while retail sales widely missed expectations (0.4% vs. 1.5% expected). Later today, a non-Monetary ECB meeting is scheduled. Thursday is the most important day, and we’ll see Q3 Eurozone GDP growth. On Friday we’ll see German trade figures. Last week, Eurozone inflation and consumer confidence accelerated.
As the euro strengthens on good economic data, we are upgrading the currency to bullish in the short-term. Looking at various technical indicators, the currency is trading within a normal range. This is based on a daily chart of the euro currency index.
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.