The euro was weaker yesterday, but is mostly flat this morning. Given that revised GDP growth figures will be announced in a few hours, today is an important day for the common currency. As political risks have been limited for the past few months, markets have been bidding up the euro thanks to strong GDP growth and expectations of tighter monetary policy. In political news, Reuters is reporting that Germany has expressed reservations regarding some of Jean-Claude Juncker's proposed reforms to the Eurozone. Specifically, acting finance minister Peter Altmaier said that "the outgoing government was not convinced that new buffers at the European level are necessary.” Altmaeir was referring to calls for a larger bailout fund beyond the existing European Stability Mechanism in place today. Our short-term and medium-term outlook on the euro remains bullish.
The EUR/USD exchange rate is now trading above 1.1790. Looking at EUR/JPY, the pair is down today and is currently trading just above 132.790. The euro is up against the pound, with EUR/GBP now trading above 0.8810.
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). Today is the most important day given that Q3 Eurozone GDP growth figures are set to be announced. 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.